<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CAMERON ASHLEY BUILDING PRODUCTS, INC.
(Name of Issuer)
COMMON STOCK (INCLUDING ASSOCIATED PREFERRED STOCK PURCHASE RIGHT)
(Title of Class of Securities)
13329010
(CUSIP Number)
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NY 10022
(212) 446-4940
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
January 17, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
/ /.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other parties
to whom copies are to be sent.
Page 1 of 22
<PAGE> 2
CUSIP NO. 13329010
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
CITICORP VENTURE CAPITAL LTD.
13-2598089
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
7 SOLE VOTING POWER
NUMBER OF 0 (SEE ITEM 5.)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0 (SEE ITEM 5.)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0 (SEE ITEM 5.)
10 SHARED DISPOSITIVE POWER
0 (SEE ITEM 5.)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (SEE ITEM 5.)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (SEE ITEM 5.)
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
Page 2 of 22
<PAGE> 3
CUSIP NO. 13329010
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
CITIBANK, N.A.
13-5266470
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF 0 (SEE ITEM 5.)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0 (SEE ITEM 5.)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0 (SEE ITEM 5.)
10 SHARED DISPOSITIVE POWER
0 (SEE ITEM 5.)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (SEE ITEM 5.)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (SEE ITEM 5.)
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
BK
Page 3 of 22
<PAGE> 4
CUSIP NO. 13329010
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
CITICORP
06-1515595
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF 0 (SEE ITEM 5.)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0 (SEE ITEM 5.)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0 (SEE ITEM 5.)
10 SHARED DISPOSITIVE POWER
0 (SEE ITEM 5.)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (SEE ITEM 5.)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (SEE ITEM 5.)
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
HC
Page 4 of 22
<PAGE> 5
CUSIP NO. 13329010
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
CITIGROUP HOLDINGS COMPANY
06-1551348
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF 0 (SEE ITEM 5.)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0 (SEE ITEM 5.)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0 (SEE ITEM 5.)
10 SHARED DISPOSITIVE POWER
0 (SEE ITEM 5.)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (SEE ITEM 5.)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (SEE ITEM 5.)
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
HC
Page 5 of 22
<PAGE> 6
CUSIP NO. 13329010
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
CITIGROUP INC.
52-1568099
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF 0 (SEE ITEM 5.)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 3,900*
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0 (SEE ITEM 5.)
10 SHARED DISPOSITIVE POWER
3,900*
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,900*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.04%*
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
HC
Page 6 of 22
* Represents shares directly beneficially owned by a wholly owned broker
dealer affiliate of Citigroup Inc.
<PAGE> 7
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D (this "Schedule 13D") relates
to the common stock and the associated preferred stock purchase rights
("Shares" or "Common Stock") of Cameron Ashley Building Products, Inc.,
a Georgia corporation ("Cameron Ashley"). The principal executive
offices of Cameron Ashley are located at 11651 Plano Road, Dallas,
Texas 75238.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is being filed by Citicorp Venture Capital,
Ltd. ("CVC"), Citibank, N.A. ("Citibank"), Citicorp, Citigroup Holdings
Company ("Citigroup Holdings") and Citigroup Inc. ("Citigroup")
(together, the "Reporting Persons").
(a)-(c) CVC is a New York corporation. The address of its
principal business office is 399 Park Avenue, New York, New York 10043.
CVC is principally engaged in the business of venture capital
investment.
Citibank is a national banking association and is the sole
stockholder of CVC. The address of its principal business office is 399
Park Avenue, New York, New York 10043. Citibank is a member of the
Federal Reserve System and the Federal Deposit Insurance Corp.
Citicorp is a Delaware corporation and is the sole stockholder
of Citibank. Citicorp is a U.S. bank holding company. The address of
its principal business office is 399 Park Avenue, New York, New York
10043.
Citigroup Holdings is a Delaware Corporation and is the sole
shareholder of Citicorp. Citigroup Holdings is a holding company for
financial services companies. The address of its financial business
office is One Rodney Square, Wilmington, Delaware 19899.
Citigroup is a Delaware corporation and is the sole
stockholder of Citigroup Holdings. The address of the principal
business office of Citigroup is 153 East 53rd Street, New York, New
York 10043. Citigroup is a diversified holding company whose businesses
provide a broad range of financial services to consumer and corporate
customers around the world. Citigroup's activities are conducted
through its Global Consumer, Global Corporate and Investing Bank, Asset
Management and Investment Activities segments. A joint filing agreement
of the Reporting Persons is attached hereto as Exhibit E.
As a result of the entering into the agreements described in
Items 3 and 4 below, for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934 and Rule 13d-5(b)(1) promulgated thereunder, the
Reporting Persons may be deemed to have formed a group with each other
and the following persons (the "CGW Parties") (each of which, to the
knowledge of the Reporting Persons, is organized as specified): (1) CGW
Southeast I, Inc., a Georgia corporation ("CGW I, Inc."), (2) CGW
Southeast Partners I, L.P., a Georgia limited Partnership ("CGW I"),
(3) Richard L. Cravey ("Cravey"), (4) Edwin A. Wahlen, Jr. ("Wahlen"),
(5) CGW, Inc., a Georgia corporation ("CGW, Inc."), (6) CGW Southeast
IV, L.L.C., a Georgia limited liability company ("CGW LLC"), (7) CGW
Southeast Partners IV, L.P., a Georgia partnership ("CGW IV"), (8) CBP
Holdings, Inc., a Georgia corporation ("CBP Holdings"), (9) CBP
Acquisition Corp., a Georgia corporation ("CBP Acquisition"), (10)
Ronald R. Ross ("Ross"), and (11) Walter J. Muratori ("Muratori"). To
the knowledge of the Reporting Persons, Cravey, Wahlen, Ross and
Muratori are all citizens of the United States of America. The filing
of this Schedule 13D is not an affirmation or admission that the
Reporting Persons and CVC, or any of them, have formed such a group or
constitute a group for any purpose.
To the knowledge of the Reporting Persons, the address of the
principal offices of (1) CGW I, Inc., (2) CGW I, (3) CGW, Inc., (4) CGW
LLC, (5) CGW IV, (6) CBP Holdings and (7) CBP Acquisition is Twelve
Piedmont Center, Suite 210, Atlanta, Georgia 30305. To the knowledge of
the Reporting Persons, the business address of Cravey and Wahlen is
Twelve Piedmont Center, Suite 210, Atlanta, Georgia 30305. To the
knowledge of the Reporting Persons, the business address of Ross and
Muratori is 11651 Plano Road, Dallas, Texas 75238.
To the knowledge of the Reporting Persons, the general partner
of CGW I is CGW I, Inc. To the knowledge of the Reporting Persons, the
general partner of CGW IV is CGW LLC, and the manager of CGW LLC is
CGW, Inc. To the knowledge of the Reporting Persons, CBP Holdings is
currently a wholly-
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<PAGE> 8
owned subsidiary of CGW IV, and CBP Acquisition is a wholly-owned
subsidiary of CBP Holdings. To the knowledge of the Reporting Persons,
Cravey and Wahlen are the directors of each of CGW I, Inc. and CGW,
Inc. To the knowledge of the Reporting Persons, Ross is the Chairman
and Chief Executive Officer of Cameron Ashley, and Muratori is the Vice
Chairman, President and Chief Operating Officer of Cameron Ashley.
The following information with respect to each executive
officer and director of CVC and Citigroup is set forth in Schedule A
and B hereto: (i) name, (ii) business address, (iii) present principal
occupation or employment and the name of any corporation or other
organization in which such employment is conducted, together with the
principal business and address of any such corporation or organization
other than the Reporting Persons for which such information is set
forth above.
To the knowledge of the Reporting Persons, Schedule C hereto
sets forth, as of the date hereof, the name, business address, present
principal occupation or employment of each executive officer and
director of (1) CGW I, Inc., (2) CGW, Inc., (3) CBP Holdings and (4)
CBP Acquisition.
(d)-(f) During the last five years, none of the Reporting
Persons or, to the best knowledge of the Reporting Persons, any of the
persons listed on Schedules A and B hereto, has been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such
person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with
respect to such laws.
To the knowledge of the Reporting Persons, during the last
five years, none of the CGW Parties nor any of the executive officers
or directors of (1) CGW I, Inc., (2) CGW, Inc., (3) CGW Holdings or (4)
CBP Acquisition has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
The citizenship of each of the individuals identified pursuant
to Paragraphs (a) through (c) is identified on Schedules A, B and C
hereto.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
CBP Holdings plans to obtain the funds to consummate the
transaction described in Item 4 from borrowings under a credit facility
to be established with Fleet Capital Corporation (the "Senior
Facility") and a credit facility to be established with J.H. Whitney &
Co. (the "Junior Facility" and, together with the Senior Facility, the
"Facilities") and from equity investments in CBP Holdings by CGW IV,
CVC and participating members of Cameron Ashley senior management.
Pursuant to a Letter Agreement dated January 17, 2000, between
CGW IV and CVC (the "Investment Letter"), CGW IV and CVC have each
agreed to invest $25.5 million in equity (common and/or preferred) in
CBP Holdings for the purpose of CBP Holdings's acquisition of Cameron
Ashley, subject to the execution of definitive documents memorializing
such agreement, the absence of any adverse change in Cameron Ashley's
business, the receipt of the financing described below in this Item 3,
and other conditions.
The Investment Letter provides that members of Cameron Ashley
management shall have the opportunity to invest an aggregate of
$4,000,000 in equity (common and/or preferred) in CBP Holdings. The
Investment Letter further provides that the board of directors of CBP
Holdings will consist of two persons designated by CGW IV, two persons
designated by CVC, two persons who are senior members of Cameron Ashley
management and one person not an officer or employee of CBP Holdings
selected by both CGW and CVC. Discussions have been initiated with Ross
and Muratori about an investment in CBP Holdings and positions on the
board of CBP Holdings. In addition, participating members of Cameron
Page 8 of 22
<PAGE> 9
Ashley senior management may exchange outstanding options to purchase
Shares for options to purchase CBP Holdings common stock and may have
the opportunity to invest outstanding Shares in exchange for CBP
Holdings common stock.
CGW IV entered into a Commitment Letter dated December 6,
1999 with Fleet Capital Corporation pursuant to which Fleet Capital
Corporation agreed, through a lending syndicate to be arranged and
subject to satisfaction of the conditions set forth therein, to provide
up to $315 million in senior, secured debt to CBP Holdings
(collectively, the "Fleet Commitment Letter"). The Senior Facility will
be secured by substantially all of the tangible and intangible assets
of the corporation surviving the merger described in Item 4 and its
subsidiaries, and will consist of a revolving loan facility of up to
$225 million; a term loan facility of up to $65 million; and a capital
expenditure facility of up to $25 million.
The Fleet Commitment Letter reflects that the Senior Facility
will bear interest at a rate based on the prime rate or Eurodollar rate
plus an applicable margin ranging to 350 basis points, depending on the
borrower's leverage and the particular facility. The Senior Facility
will mature on the earlier of March 1, 2004, and the fifth anniversary
of the closing of the merger described in Item 4. The Senior Facility
will contain customary financial and other covenants.
CGW IV and CBP Holdings entered into a Commitment Letter dated
January 13, 2000, and a related Letter Agreement dated January 13, 2000
with J. H. Whitney & Co. (collectively, the "Whitney Commitment
Letter"), pursuant to which J. H. Whitney Mezzanine Fund L.P. agreed
to provide, subject to satisfaction of the conditions set forth
therein, $55 million in unsecured subordinated debt.
The Junior Facility will bear interest at 15%. The Junior
Facility will mature at the earlier of a Liquidation Event (as defined
in the Whitney Commitment Letter) or on the eighth anniversary of the
merger described in Item 4. The Junior Facility will also contain
customary financial and operating covenants.
The Whitney Commitment Letter provides that, upon closing of
the merger described in Item 4, J. H. Whitney Mezzanine Fund, L.P. will
receive a warrant or other equity security to purchase 4% of the equity
of the surviving corporation in such merger, on a fully diluted basis.
The Credit Facilities are subject to, among other conditions,
the completion of due diligence investigations of Cameron Ashley, with
the results of the investigations being satisfactory to the lenders,
the absence of any material adverse change in the business of Cameron
Ashley and the consummation of the merger described in Item 4.
The merger agreement referenced in Item 4 below requires CBP
Holdings to use its reasonable efforts to enter into definitive
documents with respect to the financing contemplated in the Fleet
Commitment Letter and the Whitney Commitment Letter or alternative
financing, before the filing of Cameron Ashley's proxy statement
relating to the merger agreement.
This description of the Credit Facilities is summary in nature
and is not intended to be a complete description thereof and is
qualified in its entirety by reference to the full text of each of the
Fleet Commitment Letter and the Whitney Commitment Letter, which are
filed as exhibits hereto and incorporated by reference herein.
CBP Holdings currently plans to repay any borrowings under the
Credit Facilities, if and when established, out of operating cash flow
and future financings, although CBP Holdings has no current specific
plan with respect thereto. Those decisions, when made, will be based on
CBP Holdings's review from time to time of the advisability of
particular actions, as well as on prevailing interest rates and
financial and other economic conditions.
Page 9 of 22
<PAGE> 10
ITEM 4. PURPOSE OF TRANSACTION
On January 17, 2000, CBP Holdings, CBP Acquisition and Cameron
Ashley entered into an agreement and plan of merger (the "Merger
Agreement"), a copy of which is attached as an exhibit hereto and
incorporated herein by reference. CBP Holdings entered into the Merger
Agreement with the intent of acquiring control of, and the entire
equity interest in, Cameron Ashley and replacing the board of directors
of Cameron Ashley.
Pursuant to the Merger Agreement, but subject to satisfaction
of the conditions precedent set forth therein, CBP Acquisition will
merge with and into Cameron Ashley, with Cameron Ashley surviving the
merger.
As a result of the merger:
- Each outstanding share of Common Stock,
together with the associated preferred stock
purchase rights issued pursuant to that
certain Rights Agreement, dated August 19,
1997, as amended, between Cameron Ashley and
SunTrust Bank, Atlanta, other than Shares
held by CBP Holdings, will be cancelled and
converted into the right to receive $15.10
in cash.
- Each Share held by CBP Holdings will be
cancelled.
- Each outstanding share of CBP Acquisition
common stock will be converted into one
share of common stock of the surviving
corporation.
- Each outstanding stock option to purchase
Shares granted under any stock option plan,
compensation plan or arrangement of Cameron
Ashley or outstanding warrant to purchase
Shares will be cancelled, and the holder
thereof will be paid by Cameron Ashley for
each such option or warrant in an amount
equal to the product of (i) the excess of
$15.10 over the applicable exercise price
per Share and (ii) the number of Shares such
holder could have purchased pursuant to such
option or warrant immediately prior to the
effective time of the merger.
- The directors of CBP Acquisition will become
the initial directors of the surviving
corporation, each to hold his or her office
in accordance with the constituent documents
of the surviving corporation.
- The officers of Cameron Ashley will be the
initial officers of the surviving
corporation.
- The articles of incorporation of Cameron
Ashley will become the articles of
incorporation of the surviving corporation.
- The bylaws of Cameron Ashley will become the
bylaws of the surviving corporation.
Conditions to the merger of Cameron Ashley with and into CBP
Acquisition include:
- Approval of the merger by the shareholders
of Cameron Ashley.
- Receipt by CBP Holdings of the financing
described in the Fleet Commitment Letter and
the Whitney Commitment Letter or of
alternative financing with terms no less
favorable than that specified therein.
The total consideration to be paid by CBP Holdings for Cameron
Ashley, including cash to be paid in exchange for outstanding Shares
and in exchange for the cancellation of outstanding options and
Page 10 of 22
<PAGE> 11
warrants and including the refinancing and assumption of debt of
Cameron Ashley and its subsidiaries, is approximately $320 million.
Upon consummation of the transactions contemplated by the
Merger Agreement, the Shares will cease to be authorized to be traded
on the New York Stock Exchange, and the Shares will become eligible for
termination of registration under the Securities Exchange Act of 1934.
References to, and descriptions of, the Merger Agreement as
set forth in this Item 4 are qualified in their entirety by reference
to the copies of the Merger Agreement included as an exhibit to this
Schedule 13D and incorporated herein.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a)-(c) To the knowledge of the Reporting Persons, CGW I is
the shareholder of record of 938,121 Shares, which constitute
approximately 10.8% of the outstanding Common Stock, based on 8,694,954
Shares outstanding on January 17, 2000, as represented by Cameron
Ashley in the Merger Agreement. To the knowledge of the Reporting
Persons, as the general partner of CGW I, CGW I, Inc. has the power to
direct the voting and disposition of such shares. To the knowledge of
the Reporting Persons, Messrs. Cravey and Wahlen, as directors of CGW
I, Inc. have, in turn, the power to direct the voting and disposition
of such 938,121 shares.
To the knowledge of the Reporting Persons, Ross beneficially
owns approximately 147,082 Shares and Muratori beneficially owns
approximately 292,505 Shares. Neither Ross nor Muratori has effected
any transactions in Shares during the past 60 days.
Other than as set forth in this Schedule 13D, to the Reporting
Persons' knowledge as of the date hereof, none of any of the CGW
Parties, any general partner of any of the CGW Parties, any person in
control (ultimately or otherwise) of any of the CGW Parties, or any
executive officer or director thereof (including Cravey and Wahlen)
beneficially owns any Common Stock, and there have been no transactions
in Shares effected during the past 60 days by any of the foregoing.
To the best knowledge of the Reporting Persons, except as
described in this Schedule 13D, none of CVC, any person in control
(ultimately or otherwise) of CVC, or any executive officer or director
thereof beneficially owns any Common Stock, and there have been no
transactions in Shares effected during the past 60 days by CVC, any
person in control of CVC (ultimately or otherwise), or any executive
officer or director thereof; provided, however, certain investment
banking affiliates of CVC may beneficially own Shares, including Shares
that may be held in discretionary or advisory accounts with CVC
affiliates, and such CVC affiliates, directly or in connection with
such discretionary or advisory accounts, may acquire, hold, vote or
dispose of Common Stock, including transactions that may have occurred
in the past 60 days.
Beneficial ownership of Shares shown on the cover pages of
this Schedule 13D for each of the Reporting Persons assumes that the
Reporting Persons have not formed a group for purposes of Section
13(d)(3) under the Securities Exchange Act of 1934, and Rule
13d-5(b)(1) promulgated thereunder. If the Reporting Persons were
deemed to have formed a group for purposes of Section 13(d)(3) and Rule
13d-5(b)(1), the group would be deemed to own beneficially (and may be
deemed to have shared voting and dispositive power over) 1,419,287
Shares in the aggregate, constituting approximately 16.3% of the Shares
outstanding on January 17, 2000, as represented by Cameron Ashley in
the Merger Agreement.
(d) To the knowledge of the Reporting Persons, the partners of
CGW I have the right to receive a portion of the proceeds from the sale
of the Shares held by CGW I, including a portion of any proceeds
received upon the merger described in Item 4.
(e) Not applicable.
Page 11 of 22
<PAGE> 12
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The information set forth in Items 2 through 5, inclusive, is
hereby incorporated herein by reference. Copies of the Merger
Agreement, the Investment Letter, the Fleet Commitment Letter and the
Whitney Commitment Letter are included as exhibits to this Schedule
13D. To the best of the Reporting Persons' knowledge, except as
described in this Schedule 13D, there are at present no contracts,
arrangements, understandings or relationships (legal or otherwise)
among the persons named in Item 2 hereof and between any such persons
and any person with respect to any securities of Cameron Ashley.
Without limiting the generality of the immediately preceding sentence,
to the Reporting Persons' knowledge, the CGW Parties have not
discussed, or reached any agreement, arrangement or understanding,
explicit or implicit, as to the voting of any Shares held by Messrs.
Ross and Muratori. To the knowledge of the Reporting Persons, CGW I,
Inc. does, however, anticipate causing the Shares held by CGW I to be
voted in favor of the merger described in Item 4 at any meeting of
Cameron Ashley shareholders held for the purpose of voting on such
merger.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following documents are filed as exhibits to this Scheduled 13D:
(a) Agreement and Plan of Merger dated January 17, 2000, among
Cameron Ashley Building Products, Inc., CBP Holdings, Inc. and CBP
Acquisition Corp.
(b) Letter Agreement dated January 17, 2000, between CGW
Southeast Partners IV, L.P. and Citigroup Venture Capital, Ltd.
(c) Commitment Letter dated December 6, 1999, among Fleet
Capital Corporation, BancBoston Robertson Stephens Inc. and CGW
Southeast Partners IV, L.P., including Outline of Terms and Conditions
dated December 6, 1999.
(d) Commitment Letter dated January 13, 2000, among J. H.
Whitney & Co., CBP Holdings, Inc. and CGW Southeast Partners IV, L.P.
(e) Joint Filing Agreement, dated as of January, 2000, by and
among CVC, Citibank, Citicorp and Citigroup.
Page 12 of 22
<PAGE> 13
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.
Dated: January 28, 2000
CITICORP VENTURE CAPITAL, LTD.
By: /s/ Byron Knief
-----------------------------------------
Name: Byron Knief
Title: Senior Vice President
CITIBANK, N.A.
By: /s/ Kenneth Cohen
-----------------------------------------
Name: Kenneth Cohen
Title: Assistant Secretary
CITICORP
By: /s/ Kenneth Cohen
-----------------------------------------
Name: Kenneth Cohen
Title: Assistant Secretary
CITIGROUP HOLDINGS COMPANY
By: /s/ Kenneth Cohen
-----------------------------------------
Name: Kenneth Cohen
Title: Assistant Secretary
CITIGROUP INC.
By: /s/ Joan Caridi
-----------------------------------------
Name: Joan Caridi
Title: Assistant Secretary
Page 13 of 22
<PAGE> 14
SCHEDULE A
Executive Officers and Directors
of
Citicorp Venture Capital, Ltd.
The names of the Directors and the names and title of the
Executive officers of Citicorp Venture Capital, Ltd. and their business
addresses and principal occupations are set forth below. Unless otherwise
indicated, each individual is a United States citizen. If no address is given,
the director's or officer's business address is 399 Park Avenue, New York, New
York 10043. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to such individual's position with Citicorp Venture
Capital, Ltd.
<TABLE>
<CAPTION>
Name Title and Citizenship Principal Occupation and Business Address
- -------------------------- -----------------------------------------
<S> <C>
Michael T. Bradley Vice President
William T. Comfort Chairman and Director
Richard M. Cashin President
Lauren M. Connelly Vice President & Secretary
Charles E. Corpening Vice President
Michael A. Delaney Vice President
Ann Goodbody Director
Ian D. Highet Vice President
David Y. Howe Vice President
Thomas Jones Director
Byron L. Knief Vice President
Richard E. Mayberry Vice President
Thomas F. McWilliams Vice President
M. Saleem Muqaddam Vice President
Thomas H. Sanders Vice President
Paul C. Schorr Vice President
Helene B. Shavin Vice President & Assistant Secretary
Joseph M. Silvestri Vice President
David F. Thomas Vice President
James A. Urry Vice President
John D. Weber Vice President
Marc Weill Director
</TABLE>
Page 14 of 22
<PAGE> 15
SCHEDULE B
Executive Officers and Directors
of
Citigroup Inc.
The names of the Directors and the names and title of the
Executive officers of Citigroup and their business addresses and principal
occupations are set forth below. Unless otherwise indicated, each individual is
a United States citizen.
<TABLE>
<CAPTION>
Name Title and Citizenship Principal Occupation and Business Address
- -------------------------- -----------------------------------------
<S> <C>
C. Michael Armstrong Chairman & Chief Executive Officer
Director AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Alain J.P. Belda President & Chief Operations Officer
Director (Brazil) ALCOA Inc.
201 Isabella Street
Pittsburgh, Pennsylvania 15212-5858
Kenneth J. Bialkin Partner
Director Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Kenneth T. Derr Chairman & Chief Executive Officer
Director Chevron Corporation
575 Market Street
San Francisco, California 94105
John M. Deutch Institute Professor
Director Massachusetts Institute of Technology
77 Massachusetts Avenue, Room 6-208
Cambridge, Massachusetts 02139
Ann Dibble Jordan Consultant & Former Director of Social Services
Director The University of Chicago Medical Center
2904 Benton Place, NW
Washington, DC 20008
Reuben Mark Chairman & Chief Executive Officer
Director Colgate-Palmolive Company
300 Park Avenue
New York, New York 10022-7499
Michael T. Masin Vice Chairman, President-International
Director GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
</TABLE>
Page 15 of 22
<PAGE> 16
<TABLE>
<S> <C>
Dudley C. Mecum Managing Director
Director Capricorn Holdings
30 East Elm Street
Greenwich, Connecticut 06830
Richard D. Parsons President
Director Time Warner, Inc.
75 Rockefeller Plaza, 29th Floor
New York, New York 10019
Andrall E. Pearson Chairman & Chief Executive Officer
Director Tricon Global Restaurants, Inc.
660 Steamboat Road
Greenwich, Connecticut 06830
John S. Reed Chairman & Co-Chief Executive Officer
Director & Executive Officer Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Robert B. Shapiro Chairman & Chief Executive Officer
Director Monsanto Company
800 North Lindbergh Blvd.
Mail Zone DIS
St. Louis, Missouri 63167
Franklin A. Thomas Lawyer/Consultant & Former President,
Director The Ford Foundation
595 Madison Avenue, 33rd Floor
New York, New York 10022
Sanford I. Weill Chairman & Co-Chief Executive Officer
Director & Executive Officer Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Edgar S. Woolard, Jr. Former Chairman & Chief Executive Officer
Director E.I. du Pont de Nemours & Company
1007 Market Street
Wilmington, Delaware 19898
Arthur Zankel General Partner
Director First Manhattan Company
437 Madison Avenue
New York, New York 10022
The Honorable Gerald R. Ford Former President of the United States
Honorary Director Post Office Box 927
Rancho Mirage, California 92270
William I. Campbell Co-Chief Executive Officer,
Executive Officer (USA/Canada) Global
Consumer Business
1 Court Square
Long Island City, New York 11120
</TABLE>
Page 16 of 22
<PAGE> 17
<TABLE>
<S> <C>
Michael A. Carpenter Co-Chief Executive Officer
Executive Officer Global Corporate and Investment Bank
of Citigroup Inc.
388 Greenwich Street
New York, New York 10043
Paul J. Collins Vice Chairman
Executive Officer Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Edward D. Horowitz e-Citi
Executive Officer 153 East 53rd Street
New York, New York 10043
Thomas W. Jones Co-Chairman and Chief Executive Officer
Executive Officer SSB Citi Asset Management Group
388 Greenwich Street
New York, New York 10013
Robert I. Lipp Co-Chief Executive Officer,
Executive Officer of Citigroup's Global
Consumer Business
153 East 53rd Street
New York, New York 10043
Deryck C. Maughan Vice Chairman
Executive Officer Citigroup Inc.
(U.K.) 153 East 53rd Street
New York, New York 10043
Victor J. Menezes Co-Chief Executive Officer,
Executive Officer Global Corporate and Investment Bank
(India) of Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Heidi G. Miller Chief Financial Officer
Executive Officer Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Charles O. Prince, III Co-General Counsel &
Executive Officer Corporate Secretary
Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Mary Alice Taylor Global Operations & Technology
Executive Officer Citigroup Inc.
1 Court Square
Long Island City, New York 11120
</TABLE>
Page 17 of 22
<PAGE> 18
<TABLE>
<S> <C>
Todd S. Thomson Strategy & Business Development
Executive Officer Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Marc P. Weill Citigroup Investments
Executive Officer 153 East 53rd Street
New York, New York 10043
</TABLE>
Page 18 of 22
<PAGE> 19
SCHEDULE C
EXECUTIVE OFFICERS AND DIRECTORS
OF
CGW SOUTHEAST I, INC.
<TABLE>
<CAPTION>
NAME POSITION WITH REPORTING PERSON
---- ------------------------------
<S> <C>
Richard L. Cravey Director, President and Managing Director
Edwin A. Wahlen, Jr. Director, Vice President, Secretary and Managing
Director
William A. Davies Managing Director and Assistant Secretary
Garrison M. Kitchen Managing Director
Bart A. McLean Managing Director
James A. O'Donnell Managing Director
</TABLE>
For each person indicated above, the principal occupation or employment
is managing director of Cravey, Green & Wahlen, a private equity investment firm
that supports management teams in acquisitions and recapitalizations of
middle-market companies, and the business address is Twelve Piedmont Center,
Suite 210, Atlanta, Georgia 30305. Each person above is a citizen of the United
States of America
Page 19 of 22
<PAGE> 20
EXECUTIVE OFFICERS AND DIRECTORS
OF
CGW, INC.
<TABLE>
<CAPTION>
NAME POSITION WITH REPORTING PERSON
---- ------------------------------
<S> <C>
Edwin A. Wahlen, Jr. Director, President and Treasurer
Richard L. Cravey Director, Vice President and Secretary
William A. Davies Vice President
Michael D. Long Vice President
Bart A. McLean Vice President
Garrison M. Kitchen Vice President
James A. O' Donnell Vice President
Richard L. Cravey, Jr. Vice President
Roy Bowman Vice President
</TABLE>
For each person indicated above, the principal occupation or employment
is managing director of Cravey, Green & Wahlen, a private equity investment firm
that supports management teams in acquisitions and recapitalizations of
middle-market companies, and the business address is Twelve Piedmont Center,
Suite 210, Atlanta, Georgia 30305. Each person above is a citizen of the United
States of America.
Page 20 of 22
<PAGE> 21
EXECUTIVE OFFICERS AND DIRECTORS
OF
CBP HOLDINGS, INC.
<TABLE>
<CAPTION>
NAME POSITION WITH REPORTING PERSON
---- ------------------------------
<S> <C>
Bart A. McLean Director and President
Richard L. Cravey, Jr. Director, Treasurer and Secretary
</TABLE>
For each person indicated above, the principal occupation or employment
is managing director of Cravey, Green & Wahlen, a private equity investment firm
that supports management teams in acquisitions and recapitalizations of
middle-market companies, and the business address is Twelve Piedmont Center,
Suite 210, Atlanta, Georgia 30305. Each person above is a citizen of the United
States of America.
Page 21 of 22
<PAGE> 22
EXECUTIVE OFFICERS AND DIRECTORS
OF
CBP ACQUISITION CORP.
<TABLE>
<CAPTION>
NAME POSITION WITH REPORTING PERSON
---- ------------------------------
<S> <C>
Bart A. McLean Director and President
Richard L. Cravey, Jr. Director, Treasurer and Secretary
</TABLE>
For each person indicated above, the principal occupation or employment
is managing director of Cravey, Green & Wahlen, a private equity investment firm
that supports management teams in acquisitions and recapitalizations of
middle-market companies, and the business address is Twelve Piedmont Center,
Suite 210, Atlanta, Georgia 30305. Each person above is a citizen of the United
States of America.
Page 22 of 22
<PAGE> 1
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 17, 2000
BY AND AMONG
CAMERON ASHLEY BUILDING PRODUCTS, INC.,
CBP HOLDINGS, INC.
AND
CBP ACQUISITION CORP.
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January
17, 2000, is entered into by and among Cameron Ashley Building Products, Inc., a
Georgia corporation (the "Company"), CBP Holdings, Inc., a Georgia corporation
("Purchaser"), and CBP Acquisition Corp., a Georgia corporation and a wholly
owned subsidiary of Purchaser ("Acquisition Sub").
WHEREAS, the Board of Directors of each of Purchaser and Acquisition Sub
have approved the execution and delivery of this Agreement and have determined
that it is advisable and in the best interests of their respective shareholders,
that the Company and Acquisition Sub combine pursuant to the Merger (as
hereinafter defined) in which Acquisition Sub will merge with and into the
Company in accordance with the Georgia Business Corporation Code ("GBCC") and
upon the terms and subject to the conditions set forth herein, with the Company
being the surviving corporation;
WHEREAS, the Board of Directors of the Company (the "Board") has, in
light of and subject to the terms and conditions set forth herein, in accordance
with the recommendation of a duly-constituted special committee of independent
members of the Board (the "Special Committee"), and after considering the
long-term prospects and interests of the Company and its shareholders (i)
determined that the consideration to be paid for each Share (as hereinafter
defined) in the Merger (other than Shares held by Purchaser or any affiliate
thereof) is fair to the holders of such Shares and that the Merger is in the
best interests of such shareholders, (ii) approved and adopted this Agreement
and (iii) resolved to recommend that the holders of such Shares approve this
Agreement and the Merger upon the terms and subject to the conditions set forth
herein; and
WHEREAS, Purchaser, Acquisition Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Purchaser, Acquisition Sub and the Company hereby agree as
follows:
-2-
<PAGE> 3
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the GBCC, at the Effective Time (as
hereinafter defined) the Company and Acquisition Sub shall consummate a merger
(the "Merger") pursuant to which (a) Acquisition Sub shall merge with and into
the Company and the separate corporate existence of Acquisition Sub shall
thereupon cease, (b) the Company shall be the successor or the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Georgia and (c) the corporate existence of the Company with all of its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger.
Section 1.2 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause (a) a Certificate of Merger to be executed and filed on the
date of the Closing (as hereinafter defined) (or on such other date as Purchaser
and the Company may agree) with the Secretary of State of Georgia in such form
as required by, and executed in accordance with the relevant provisions of, the
GBCC and (b) all other filings or recordings required by the GBCC in connection
with the Merger. Prior to the filing referred to in this Section 1.2, a closing
(the "Closing") will be held at the offices of Locke Liddell & Sapp LLP, 2200
Ross Avenue, Suite 2200, Dallas, Texas 75201, at 10:00 a.m., Dallas, Texas time
(or such other place, date and time as the parties may agree in writing). The
Merger shall become effective at such time as such Certificate of Merger is duly
filed with the Secretary of State of Georgia, or at such later time specified in
such Certificate of Merger (the time the Merger becomes effective being referred
to herein as the "Effective Time"). Subject to the terms and conditions hereof,
unless otherwise mutually agreed upon in writing by the authorized officers of
the Company and Purchaser, the parties hereto shall use their reasonable efforts
to cause the Effective Time to occur on the first business day following the
last to occur of (i) the effective date (including expiration of any applicable
waiting period) of the last required consent of any Governmental Entity having
authority over and approving or exempting the Merger and (ii) the date on which
the shareholders of the Company approve this Agreement and the Merger to the
extent such approval is required by applicable law; or such later date within
two (2) business days thereof as may be specified by Purchaser.
Section 1.3 Effects of the Merger. At the Effective Time, the Merger
shall have the effects as set forth in the applicable provisions of the GBCC.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Company and Acquisition Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Acquisition Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Amended and Restated Articles of Incorporation and Bylaws.
-3-
<PAGE> 4
(a) The Amended and Restated Articles of Incorporation (the
"Restated Articles") of the Company in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until amended in accordance with applicable law.
(b) The Bylaws of the Company in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 1.5 Directors. The directors of Acquisition Sub at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Restated Articles and the Bylaws of the Surviving
Corporation until each such director's successor is duly elected or appointed
and qualified.
Section 1.6 Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Restated Articles and the Bylaws of the Surviving
Corporation until each such officer's successor is duly elected or appointed and
qualified.
Section 1.7 Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Acquisition Sub
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of either the Company or
Acquisition Sub, all such deeds, bills of sale, assignments and assurances and
to take and do, in the name and on behalf of each of such corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all rights, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
Section 1.8 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of any of Purchaser, Acquisition
Sub or the Company:
(a) Each issued and outstanding share of Common Stock, no par
value, of the Company ("Share") immediately prior to the Effective Time,
together with the associated preferred stock purchase rights (the
"Rights") issued pursuant to that certain Rights Agreement, dated as of
August 19, 1997, as amended (the "Rights Agreement"), by and between the
Company and SunTrust Bank, Atlanta, Georgia, as Rights Agent (other than
(i) any Shares to be canceled pursuant to Sections 1.8(b) and 1.8(c) and
(ii) any Dissenting Shares (as defined in Section 2.1 hereof)), shall be
canceled and extinguished and be converted into the right to receive
$15.10 in cash (the "Merger Consideration"), payable to the holder
thereof, without interest thereon, upon the surrender of the certificate
formerly representing such Share in the manner provided in Section 2.2
hereof and less any required withholding of Taxes (as hereinafter
defined). From and after the Effective Time, all such Shares shall no
longer be outstanding and shall be deemed to be canceled and 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 therefor, without interest
thereon, upon the
-4-
<PAGE> 5
surrender of such certificate in accordance with Section 2.2 hereof, or
the right, if any, to receive payment from the Surviving Corporation of
the "fair value" of such Shares as determined in accordance with Article
13 of the GBCC.
(b) Each Share held in the treasury of the Company and each
Share owned by any Subsidiary of the Company immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on
the part of Acquisition Sub, the Company or the holder thereof, be
canceled, retired and cease to exist and no payment or distribution shall
be made with respect thereto.
(c) Each Share held by Purchaser shall be canceled.
(d) As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any Shares or holders of
Common Stock, par value $0.01 per share, of Acquisition Sub ("Acquisition
Sub Common Stock"), each issued and outstanding share of Acquisition Sub
Common Stock shall be converted into one (1) validly issued, fully paid
and nonassessable share of common stock, no par value per share, of the
Surviving Corporation.
Section 1.9 Stock Options and Warrants. At or immediately prior to the
Effective Time, each outstanding stock option (an "Option") to purchase Shares
granted under any stock option plan, compensation plan or arrangement of the
Company or outstanding warrant (a "Warrant") to purchase Shares shall be
canceled and the holder of each such Option or Warrant (whether or not then
vested or exercisable) shall be paid by the Company promptly after the Effective
Time for each such Option or Warrant an amount equal to the product of (a) the
excess, if any, of the Merger Consideration over the applicable exercise price
per Share and (b) the number of Shares such holder could have purchased
(assuming full vesting and exercisability of such Option or Warrant) had such
holder exercised such Option or Warrant in full immediately prior to the
Effective Time.
Section 1.10 Shareholders' Meeting. If required by applicable law in
order to consummate the Merger, the Company, acting through the Board, shall, in
accordance with applicable law, subject to the terms and conditions of this
Agreement:
(a) as soon as reasonably practicable, duly call, give notice
of, convene and hold an annual or special meeting of its shareholders (the
"Shareholders' Meeting") for the purpose of considering and taking action
upon the approval of the Merger and the
-5-
<PAGE> 6
approval and adoption of this Agreement;
(b) except as permitted in Section 1.10(c) and 5.2 below,
include in the Proxy Statement (as hereinafter defined) the recommendation
of the Board that shareholders of the Company vote in favor of the
approval of the Merger and the approval and adoption of this Agreement;
(c) use reasonable efforts to obtain shareholder approval
(subject to the Board, after having consulted with legal counsel,
determining in good faith that the taking of such action would constitute
a breach of the Board's fiduciary obligations under applicable law);
(d) prepare and file with the Securities and Exchange
Commission ("SEC") a preliminary proxy or information statement relating
to the Merger and this Agreement and use its best efforts to obtain and
furnish the information required to be included by it in the proxy or
information statement and, after consultation with Purchaser, respond
promptly to any comments made by the SEC with respect to the preliminary
proxy or information statement, and cause a definitive proxy or
information statement, including any amendment or supplement thereto (such
proxy or information statement, together with any amendments or
supplements thereto, the "Proxy Statement") to be mailed to its
shareholders at the earliest practicable time; and
(e) incorporate into the Proxy Statement written information
provided by Purchaser concerning Purchaser and Acquisition Sub required to
be included in the Proxy Statement. The Company shall not be responsible
or liable for any untrue statement of a material fact or omission to state
a material fact required to be stated in the Proxy Statement or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, to the extent that any such untrue
statement of a material fact or omission to state a material fact was made
by the Company in reliance upon and in conformity with written information
concerning Purchaser or Acquisition Sub furnished to the Company by
Purchaser specifically for use in the Proxy Statement. Purchaser agrees
that the written information concerning Purchaser and Acquisition Sub
provided by it for inclusion in the Proxy Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
meeting(s) of shareholders of the Company, will not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
Section 2.1 Dissenting Shares.
-6-
<PAGE> 7
(a) Notwithstanding anything in this Agreement to the
contrary, any Shares held by a holder who has demanded and perfected his
demand for payment for his Shares in accordance with Article 13 of the
GBCC and as of the Effective Time has neither withdrawn nor lost his right
to such appraisal ("Dissenting Shares") shall not be converted into or
represent a right to receive the Merger Consideration pursuant to Section
1.8, but the holder thereof shall be entitled to only such rights as are
granted by the GBCC.
(b) Notwithstanding the provisions of Section 2.l(a), if any
holder of Shares who demands payment for his Shares under Article 13 of
the GBCC effectively withdraws or loses (through failure to perfect or
otherwise) his right to such payment under Article 13, then as of the
Effective Time or the occurrence of such event, whichever later occurs,
such holder's Shares shall automatically be converted into and represent
only the right to receive the Merger Consideration as provided in Section
1.8(a), without interest thereon, upon surrender of the certificate or
certificates representing such Shares pursuant to Section 2.2 hereof.
(c) The Company shall give Purchaser (i) prompt notice of any
such demands for payment under Article 13 of the fair value of any Shares,
withdrawals of such demands and any other instruments served pursuant to
the GBCC received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for payment under the
GBCC. The Company shall not voluntarily make any payment with respect to
any demands for payment and shall not, except with the prior written
consent of Purchaser, settle or offer to settle any such demands.
Section 2.2 Payment for Shares.
(a) Prior to the Effective Time, Purchaser shall designate a
bank or trust company, reasonably acceptable to the Company, to act as
paying agent in connection with the Merger (the "Paying Agent") pursuant
to a paying agent agreement providing for the matters set forth in this
Section 2.2 and otherwise reasonably satisfactory to the Company. At the
Effective Time, Purchaser shall deposit, or cause to be deposited, in
trust with the Paying Agent for the benefit of holders of Shares the
aggregate consideration to which such holders shall be entitled at the
Effective Time pursuant to Section 1.8. Such funds shall be invested as
directed by the Surviving Corporation pending payment thereof by the
Paying Agent to holders of the Shares. Earnings from such investments
shall be the sole and exclusive property of the Surviving Corporation and
no part thereof shall accrue to the benefit of the holders of the Shares.
(b) As soon as reasonably practicable after the Effective
Time, the Paying Agent shall mail to each record holder, as of the
Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares
(the "Certificates"), whose Shares were converted pursuant to Section 1.8
into the right to receive the Merger Consideration (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 proper
delivery of the Certificates to the Paying Agent and shall be
-7-
<PAGE> 8
in such form and have such other provisions not inconsistent with this
Agreement) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Merger Consideration
(together, the "Transmittal Documents"). Upon surrender of a Certificate
for cancellation to the Paying Agent or to such other agent or agents as
may be appointed by Purchaser, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, without any interest thereon, and less
any applicable withholding Taxes, and the Certificate so surrendered shall
forthwith be canceled. If payment of the Merger Consideration is to be
made to a Person (as hereinafter defined) other than the Person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
shall otherwise be in proper form for transfer, that the signatures on the
Certificate or any related stock power shall be properly guaranteed and
that the Person requesting such payment shall have paid any transfer and
other Taxes required by reason of the payment of the Merger Consideration
to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such Tax either has been paid or is not applicable. Until
surrendered in accordance with the provisions of and as contemplated by
this Section 2.2 each Certificate (other than (i) Certificates
representing Shares subject to Sections 1.8(b) and 1.8(c) and (ii)
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration in cash as
contemplated by this Section 2.2. Upon the surrender of Certificates in
accordance with the terms and instructions contained in the Transmittal
Documents, Purchaser shall cause the Paying Agent to pay the holder of
such Certificates in exchange therefor cash in an amount equal to the
Merger Consideration multiplied by the number of Shares represented by
such Certificate (other than Certificates representing Dissenting Shares
and Certificates representing Shares held by Purchaser or in the treasury
of the Company).
(c) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further registration of
transfers of any shares of capital stock thereafter on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set
forth, in this Article II. No interest shall accrue or be paid on any cash
payable upon the surrender of a Certificate or Certificates which
immediately before the Effective Time represented outstanding Shares.
(d) From and after the Effective Time, the holders of
Certificates evidencing ownership of Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided herein or by applicable law.
-8-
<PAGE> 9
(e) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall pay or cause to be paid in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration for the Shares
represented thereby. When authorizing such payment of the Merger
Consideration in exchange therefor, the Board of Directors of the
Surviving Corporation may, in its discretion and as a condition precedent
to the payment thereof, require the owner of such lost, stolen or
destroyed Certificate to give the Surviving Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against
the Surviving Corporation with respect to the Certificate alleged to have
been lost, stolen or destroyed.
(f) Promptly following the date which is six (6) months after
the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any cash (including any earnings and
interest received with respect thereto), Certificates and other documents
in its possession relating to the Merger, which had been made available to
the Paying Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat or similar
laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates, without
any interest thereon.
(g) The Merger Consideration paid in the Merger shall be net
to the holder of Shares in cash, subject to reduction only for any
applicable federal withholding Taxes or, as set forth in Section 2.2(b),
stock transfer Taxes payable by such holder.
(h) Notwithstanding anything to the contrary in this Section
2.2, none of the Paying Agent, Purchaser or the Surviving Corporation
shall be liable to any holder of a Certificate formerly representing
Shares for any amount properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If Certificates
are not surrendered prior to two (2) years after the Effective Time,
unclaimed funds payable with respect to such Certificates shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any Person
previously entitled thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered to Purchaser prior to the
execution of this Agreement setting forth specific exceptions to the Company's
representations and warranties set forth herein (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to Purchaser as follows:
Section 3.1 Organization and Qualification, Subsidiaries.
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(a) The Company Disclosure Schedule sets forth in Section
3.1(a) a complete list of all Subsidiaries of the Company that are
corporations (identifying its jurisdiction of incorporation, each
jurisdiction in which it is qualified and/or licensed to transact
business, and the number of shares owned and percentage ownership interest
represented by such share ownership) and all of its Subsidiaries that are
general or limited partnerships, limited liability companies or other
non-corporate entities (identifying the law under which such entity is
organized, each jurisdiction in which it is qualified and/or licensed to
transact business, and the amount and nature of the ownership interest
therein). Except as noted in Section 3.1(a) of the Company Disclosure
Schedule, each of the Company and its Subsidiaries is a corporation and
each Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and (as to
corporations) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its businesses as now
being conducted. Each Subsidiary of the Company which is not a corporation
has all power and authority under its governing documents and the law
under which it was organized to own, lease and operate its properties and
to carry on its businesses as now being conducted. The minute book and
other organizational documents for each of the Company and its
Subsidiaries have been made available to Purchaser for its review and,
except as disclosed in Section 3.1(a) of the Company Disclosure Schedule,
are true and complete in all material respects as in effect as of the date
of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
shareholders thereof. The Company has heretofore delivered or made
available to Purchaser accurate and complete copies of the Restated
Articles and Bylaws, as currently in effect, of the Company and promptly
will deliver to Purchaser, upon request, accurate and complete copies of
the certificate or articles of incorporation and bylaws, as currently in
effect, of each of its Subsidiaries. As used in this Agreement, the term
"Subsidiary" shall mean with respect to any party, any corporation or
other organization, whether incorporated or unincorporated or domestic or
foreign to the United States of which (i) such party or any other
Subsidiary of such party is a general partner or (ii) at least a majority
of the securities or other interests having by their terms ordinary voting
power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization
is directly or indirectly owned or controlled by such party or by any one
or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(b) Each of the Company and its Subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not, individually or in aggregate,
have a Company Material Adverse Effect. As used in this Agreement, the
term "Company Material Adverse Effect" shall mean any change(s) or
effect(s) that, individually or in the aggregate, are materially adverse
to the financial condition, business
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<PAGE> 11
or results of operations of the Company and its Subsidiaries, taken as a
whole, excluding in all cases: (i) events or conditions generally
affecting the industry in which the Company and its Subsidiaries operate
or arising from changes in general business or economic conditions; (ii)
any effect resulting from any change in law or GAAP, which generally
affects entities such as the Company or its Subsidiaries; (iii) events
resulting from the execution and/or announcement of this Agreement; and
(iv) any effect resulting from compliance by the Company or any of its
Subsidiaries with the terms of this Agreement.
(c) Except as set forth in Section 3.1(c) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary owns (i) any
equity interest, or option to purchase such an interest, in any
corporation or other entity or (ii) marketable securities where the
Company's or Subsidiary's equity interest in any entity exceeds five
percent (5%) of the outstanding equity of such entity on the date hereof.
Section 3.2 Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, no par value (the "Common Stock"), and
100,000 shares of preferred stock, no par value (the "Preferred Stock").
As of the date hereof, (i) 8,694,954 shares of Common Stock are issued and
outstanding and no shares of Preferred Stock are outstanding and (ii)
10,413 shares of Common Stock have been authorized for issuance but have
not been issued. As of the date hereof, 1,189,911 shares of Common Stock
and no shares of Preferred Stock are held in the treasury of the Company.
All of the Shares have been validly issued, are fully paid, nonassessable
and have been issued free of preemptive rights. Section 3.2 of the Company
Disclosure Schedule identifies the number of shares of each class of
capital stock of the Company which are reserved and subject to any Company
Benefit Plan, indicating the name of the plan, the date of the grant, the
holder of the option, the number of shares granted, the type of option and
the exercise price thereof. Section 3.2 of the Company Disclosure Schedule
also identifies the number of shares of each class of capital stock of the
Company which are reserved and subject to any warrant of the Company,
indicating the warrant agreement, the date of the warrant, the holder of
the warrant, the number of shares subject to the warrant and the exercise
price thereof. The actions to be taken in Section 1.9 hereof with respect
to all outstanding options and warrants of the Company are permissible
under the terms of such options and warrants without any further action on
the part of the Company, Purchaser or the holders of any such options or
warrants. As of the date hereof, options to purchase 1,630,285 shares of
Common Stock were outstanding under Company Benefit Plans and warrants to
purchase 200,000 shares of Common Stock were outstanding. Except as set
forth above and except for the Rights issued pursuant to the Rights
Agreement, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company or any
of its Subsidiaries convertible into or exchangeable for shares of capital
stock or voting securities of the Company, (iii) no options or other
rights to acquire from the Company or any of its Subsidiaries, and no
other contract, understanding, arrangement or obligation (whether or not
contingent) of the Company or any of its Subsidiaries to issue or sell,
directly or indirectly, any capital stock, voting
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<PAGE> 12
securities, securities convertible into or exchangeable for capital stock
or voting securities, or other securities of the Company or any of its
Subsidiaries, or any other ownership interests in the Company or any of
its Subsidiaries and (iv) no equity equivalents, interests in the
ownership or earnings of the Company or any of its Subsidiaries or other
similar rights (collectively, "Company Securities"). Except for the put
options relating to the capital stock of Field Marketing, Inc., there are
no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities.
(b) Except as set forth in Section 3.2 of the Company
Disclosure Schedule, all of the outstanding capital stock of, or other
ownership interests in, each Subsidiary of the Company, is owned by the
Company, directly or indirectly, free and clear of any Lien (as
hereinafter defined) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be
provided as a matter of law) and is fully paid and non-assessable and was
issued free of preemptive rights. For purposes of this Agreement, "Lien"
shall mean, with respect to any asset (including, without limitation, any
security) any option, claim, mortgage, lien, pledge, charge, security
interest or encumbrance or restriction of any kind in respect of such
asset (other than rights or interests held by lessors or sublessors under
operating leases entered into in the ordinary course of business and other
than Permitted Liens). For purposes of this Agreement, "Permitted Liens"
shall mean (i) statutory Liens not yet delinquent, (ii) Liens with respect
to the properties or assets that do not, individually or in the aggregate,
materially detract from the value or interfere with the use of the
properties or assets or otherwise materially impair present business
operations at such properties, (iii) Liens for Taxes and other
governmental charges not yet delinquent or the validity of which are being
contested in good faith by appropriate actions and (iv) Liens reflected on
the 1999 Financial Statements or Section 3.2(b) of the Company Disclosure
Schedule.
(c) The Shares and the Rights constitute the only class of
equity securities of the Company or any of its Subsidiaries registered or
required to be registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(d) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party
with respect to the voting of the capital stock of the Company or any of
the Subsidiaries.
(e) Other than as set forth in the 1999 Financial Statements
or in Section 3.2(e) of the Company Disclosure Schedule, there is no
outstanding material Indebtedness (as hereinafter defined) of the Company
or any of its Subsidiaries. Except as identified in the 1999 Financial
Statements or in Section 3.2(e) of the Company Disclosure Schedule, no
such Indebtedness of the Company or its Subsidiaries contains any
restriction upon (i) the prepayment of such Indebtedness, (ii) the
incurrence of Indebtedness by the Company or its Subsidiaries,
respectively, or (iii) the ability of the
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<PAGE> 13
Company or its Subsidiaries to grant any Liens on its properties or
assets. For purposes of this Agreement, "Indebtedness" shall include (i)
all indebtedness for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices and operating leases), (ii) any other indebtedness which is
evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all obligations in respect of
acceptances issued or created, (v) all liabilities secured by any Lien on
any property and (vi) all guarantee obligations.
Section 3.3 Authority Relative to this Agreement, Consents and
Approvals.
(a) The Company has all the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
Merger in accordance with the terms hereof (subject to obtaining the
necessary approval and adoption of this Agreement and approval of the
Merger by the shareholders of the Company as contemplated by Section 1.10
hereof). The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the Merger have been duly
and validly authorized by the Board and, except for obtaining the approval
of the Company's shareholders as contemplated by Section 1.10 hereof, no
other corporate action or corporate proceedings on the part of the Company
are necessary to authorize the execution and delivery by the Company of
this Agreement and the consummation by the Company of the Merger. This
Agreement has been duly and validly executed and delivered by the Company,
and assuming due and valid authorization, execution and delivery by
Purchaser and Acquisition Sub, constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceedings may be brought).
(b) The Board has duly and validly approved, and taken all
corporate actions required to be taken by it for the consummation of, the
Merger, including, but not limited to, all actions required to satisfy the
provisions of Article VII of the Restated Articles and all actions
required to exempt this Agreement and the transactions contemplated hereby
from Sections 14-2-1131 through 14-2-1133 and 14-2-1110 through 14-2-1113
of the GBCC.
Section 3.4 SEC Reports, Financial Statements.
(a) Except as set forth on Section 3.4(a) of the Company
Disclosure Schedule, since October 31, 1998, the Company has timely filed
with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it with the SEC pursuant to the Securities Act of
1933, as amended (the "Securities Act"), and the SEC's rules and
regulations promulgated thereunder and the Exchange Act and the SEC's
rules and regulations promulgated thereunder, including, without
limitation, any financial
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<PAGE> 14
statements or schedules included therein (any such documents filed prior
to the date hereof being collectively, the "Company SEC Documents"). At
the time filed, or in the case of registration statements on their
respective effective dates, the Company SEC Documents (i) complied in all
material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be, and the rules and regulations
promulgated thereunder and (ii) did not, at the time filed (or in the case
of registration statements, at the time of effectiveness), contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made,
not misleading. No Subsidiary of the Company is required to file any form,
report or other document with the SEC. The audited financial statements
dated October 31, 1999 delivered to Purchaser (the "1999 Financial
Statements") and the financial statements included in the Company SEC
Documents filed since October 31, 1998 (i) have been prepared from, and
are in accordance with, the books and records of the Company and its
Subsidiaries, (ii) complied in all material respects with applicable
accounting requirements and with the published rules and regulations of
the SEC with respect thereto, (iii) have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated
in the notes thereto) and (iv) fairly present, in all material respects,
the consolidated financial position and the consolidated results of
operations and cash flows (and changes in financial position, if any) of
the Company and its Subsidiaries as of the times and for the periods
referred to therein, except that any such Financial Statements that are
unaudited, interim financial statements were or are subject to normal and
recurring year end adjustments, which were not or are not expected to be
material in amount or effect.
(b) The Company has heretofore delivered or made available to
Purchaser, in the form filed with the SEC (including any amendments
thereto), (i) its Annual Reports on Form 10-K for each of the three fiscal
years ended October 31, 1996, October 31, 1997 and October 31, 1998, (ii)
all definitive proxy statements relating to the Company's meetings of
shareholders (whether annual or special) held since October 31, 1998 and
(iii) all other reports or registration statements filed by the Company
with the SEC since October 31, 1998.
(c) The Company has heretofore furnished or made available to
Purchaser a complete and correct copy of any amendments or modifications,
which have not yet been filed by the Company with the SEC, to all
agreements, documents or other instruments which previously had been filed
by the Company and are currently in effect.
Section 3.5 Proxy Statement. The Proxy Statement to be sent to the
shareholders of the Company in connection with the Shareholders' Meeting, as of
the date first mailed to the shareholders of the Company and at the time of the
Shareholders' Meeting, and the Rule 13E-3 Transaction Statement on Schedule
13E-3 (together with all amendments and supplements thereto, the "Schedule
13E-3"), at the time filed with the SEC, will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they
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<PAGE> 15
were made, not misleading. The Proxy Statement and the Schedule 13E-3 will, when
filed by the Company with the SEC, comply as to form in all material respects
with the applicable provisions of the Exchange Act and the SEC rules and
regulations promulgated thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to the statements made in any
of the foregoing documents based on written information supplied by or on behalf
of Purchaser, Acquisition Sub or any of their respective affiliates specifically
for inclusion therein.
Section 3.6 Consents and Approvals; No Violations. No filing with or
notice to, and no permit, authorization, consent or approval of, any court or
tribunal or any federal, state, county or local administrative, governmental or
regulatory body, agency, authority (including a self-regulated authority),
instrumentality, commission, board or body (a "Governmental Entity") is required
on the part of the Company or any of its Subsidiaries for the execution,
delivery and performance by the Company of this Agreement or the consummation by
the Company of the Merger, except (a) in connection with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (b) pursuant to the applicable requirements of the
Exchange Act and the SEC's rules and regulations promulgated thereunder, (c) the
filing and recordation of the Certificate of Merger pursuant to the GBCC or (d)
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not have a Company Material
Adverse Effect. Except as disclosed in Section 3.6 of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement by
the Company nor the consummation by the Company of the Merger will (i) conflict
with or result in any breach of any provision of the respective Certificate or
Articles of Incorporation or Bylaws (or similar governing documents) of the
Company or of any its Subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
or require any consent pursuant to, or result in the creation of any Lien on any
asset of the Company or its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, except in the case
of (ii) or (iii) for any such violations, breaches, defaults (or rights of
termination, amendment, cancellation or acceleration), Liens or failures to
obtain consents which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 3.7 No Default. None of the Company or any of its Subsidiaries
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (a) its Certificate or Articles of Incorporation or
Bylaws (or similar governing documents), (b) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its Subsidiaries is now a party or by which any
of them or any of their respective properties or assets may be bound or (c) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
the Company, any of its Subsidiaries or any of
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<PAGE> 16
their respective properties or assets, except in the case of (b) or (c) for
violations, breaches or defaults which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
Section 3.8 No Undisclosed Liabilities. Except (a) for liabilities
incurred pursuant to the terms of this Agreement, (b) for liabilities that are
accrued or reserved against in the consolidated balance sheets of the Company
included in the 1999 Financial Statements or (c) as set forth in Section 3.8 of
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that have, or would reasonably be expected to
have, a Company Material Adverse Effect or that would be required by GAAP to be
reflected or reserved against on a consolidated balance sheet, or in the notes
thereto, of the Company. Except as set forth in Section 3.8 of the Company
Disclosure Schedule, there is no Indebtedness of the Company and its
Subsidiaries which exceeds $50,000 and will accelerate or become due or result
in a right of redemption or repurchase on the part of the holder of such
Indebtedness (with or without due notice or lapse of time) as a result of this
Agreement or the Merger. Neither the Company nor any Subsidiary has incurred or
paid any liability since the date of the Company Balance Sheet except for such
liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement. Except as
disclosed in the Company SEC Documents or in Section 3.8 of the Company
Disclosure Schedule, neither the Company nor any Subsidiary is directly or
indirectly liable, by guarantee, indemnity, or otherwise, upon or with respect
to, or obligated, by discount or repurchase agreement or in any other way, to
provide funds in respect to, or obligated to guarantee or assume any liability
of any Person for any amount in excess of $100,000. As used in this Section 3.8,
the term "liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
Section 3.9 Litigation. Except as disclosed in the Company SEC Documents
or in Section 3.9 of the Company Disclosure Schedule, there is no suit, claim,
complaint, action, arbitration, criminal prosecution, governmental or other
examination, investigation, hearing, administrative or other proceeding
(collectively, "Litigation") pending or, to the knowledge of the Company,
threatened against, affecting or involving the Company or any of its
Subsidiaries or any of their respective properties or assets before any
Governmental Entity which is reasonably likely to have a Company Material
Adverse Effect. Except as disclosed in the Company SEC Documents or in Section
3.9 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which is reasonably likely to have a Company Material Adverse Effect. Reserves
reflected on the 1999 Financial Statements are adequate for all Litigation
disclosed in the Company SEC Documents or in Section 3.9 of the Company
Disclosure Schedule. Section 3.9 of the Company Disclosure Schedule contains a
summary of all Litigation as of the date of this
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<PAGE> 17
Agreement where the potential liability is reasonably likely to exceed $25,000
(i) to which the Company or any Subsidiary is a party or (ii) which names the
Company or any Subsidiary as a defendant or cross-defendant or for which the
Company or any Subsidiary has any potential liability.
Section 3.10 Compliance with Applicable Law. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not have a Company Material
Adverse Effect. The businesses of the Company and its Subsidiaries are not being
and have not been conducted in violation of any law, ordinance or regulation of
any Governmental Entity, except for violations or possible violations which,
individually or in the aggregate, would not have a Company Material Adverse
Effect. None of the directors, officers, agents, representatives or employees of
the Company or its Subsidiaries (in their capacity as directors, officers,
agents, representatives or employees) has taken any action or made any omission
which would violate any law, ordinance or regulation of any Governmental Entity,
except for violations or possible violations which, individually or in the
aggregate, would not have a Company Material Adverse Effect. Except as set forth
in Sections 3.9 or 3.10 of the Company Disclosure Schedule or in the Company SEC
Documents, no investigation or review by any Governmental Entity with respect to
the Company or any of its Subsidiaries, or with respect to any of their
respective directors, officers, agents, representatives or employees (in regard
to actions taken or omissions made in their capacity as directors, officers,
agents, representatives or employees) is pending or, to the knowledge of the
Company, threatened. Excluded from the scope of this representation and warranty
are all matters related to Environmental Laws, Materials of Environmental
Concern or Environmental Claims; these excluded matters, to the extent subject
to a representation and warranty under this Agreement, are covered exclusively
by Section 3.12.
Section 3.11 Employee Benefit Matters.
(a) All Company Benefit Plans (as defined in Section 3.11(h))
are listed in Section 3.11 of the Company Disclosure Schedule or in the
Company SEC Documents. True and complete copies of the Company Benefit
Plans (including: (i) all trust agreements or other funding arrangements
for such Company Benefit Plans (including insurance contracts), and all
amendments thereto, (ii) with respect to any such Company Benefit Plans or
amendments, all determination letters, rulings, opinion letters,
information letters, or advisory opinions issued by the United States
Internal Revenue Service, the United States Department of Labor, or the
Pension Benefit Guaranty Corporation after December 31, 1992, (iii) annual
reports or returns, audited or unaudited financial statements, actuarial
valuations and reports and summary annual reports prepared for any Company
Benefit Plan with respect to the most recent three (3) plan years, (iv)
the most recent summary plan descriptions and any material modifications
thereto and (v) any filing or compliance action taken under Revenue
Procedures 98-22, 99-13, or 99-31) have been provided or made available to
the Purchaser. Except as set
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<PAGE> 18
forth in Section 3.1l(a) of the Company Disclosure Schedule, each Company
Benefit Plan has been administered and maintained in all material respects
in compliance with its terms, with the material provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), with the
Internal Revenue Code of 1986, as amended (the "Code"), and with all other
applicable laws. Each Company Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue
Service (the "IRS") to be so qualified and no event has occurred that
could reasonably be expected to adversely affect the qualified status of
such Company Benefit Plan or the tax-exempt status of any trust. All
government approvals for tax exemption of any trust applicable to a
Company Benefit Plan have been timely obtained and all such approvals as
well as all IRS determination letters applicable to a Company Benefit Plan
continue in full force and effect. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any Company
Benefit Plan that, assuming the taxable period of such transaction expired
as of the date hereof, would subject the Company to a Tax imposed by
either Section 4975 of the Code or Section 502(i) of ERISA. To the
knowledge of the Company, there are no pending, nor has the Company or any
of its Subsidiaries received notice of any threatened, claims against or
otherwise involving any of the Company Benefit Plans (other than routine
claims for benefits). No Company Benefit Plan is under audit or
investigation by the IRS, the Department of Labor or the Pension Benefit
Guaranty Corporation and, to the knowledge of the Company, no such audit
or investigation is threatened. Except as listed on Section 3.11(a) of the
Company Disclosure Schedule, all contributions and other payments required
to be made as of the date of this Agreement to, or pursuant to, the
Company Benefit Plans have been made or accrued for in the 1999 Financial
Statements. Neither the Company nor any entity under "common control" with
the Company within the meaning of Section 4001 of ERISA has at any time
contributed to, or been required to contribute to, any "pension plan" (as
defined in Section 3(2) of ERISA) that is subject to Title IV of ERISA or
Section 412 of the Code, including, without limitation, any
"multi-employer plan" (as defined in Sections 3(37) and 4001(a)(3) of
ERISA) and neither the Company nor any such entity has at any time
incurred or could reasonably expect to incur any liability under Title IV
of ERISA. To the knowledge of the Company, neither the Company nor any of
its Subsidiaries nor any employee or agent thereof, has made any oral or
written representation to any participant in or beneficiary of a Company
Benefit Plan, or to any other individual or entity that is contrary to the
written or otherwise preexisting terms and provisions of any Company
Benefit Plan, which representations (in the aggregate) could reasonably
create a material liability for the Company.
(b) Except as listed on Section 3.11(b) of the Company
Disclosure Schedule or in the Company SEC Documents, the consummation of
the Merger will not (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Company Benefit Plan,
employment or severance agreement, trust, loan or other compensation or
benefits agreement or arrangement that will or may result in any payment
(whether of severance pay, unemployment compensation, golden parachute or
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otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any current or former employee, officer, director, agent or
consultant of the Company or any Subsidiary. Except as listed on Section
3.11(b) of the Company Disclosure Schedule, no such payment, acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits
or obligation to fund benefits will cause a loss of tax deductions under
Section 280G of the Code.
(c) Except as listed on Section 3.11(c) of the Company
Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries
maintains or contributes to any Company Benefit Plan which provides, or
has any liability to provide, life insurance, medical, severance or other
employee welfare benefits to any employee upon or with respect to periods
following his retirement or termination of employment, except as may be
required by Section 4980B of the Code and (ii) there are no restrictions
on the rights of the Company to amend or terminate any such retiree health
or benefit Plan without incurring any liability thereunder.
(d) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of
employees and former employees of the Company and their respective
beneficiaries, have been fully reflected on the 1999 Financial Statements
to the extent required by and in accordance with GAAP.
(e) To the extent a Company Benefit Plan has excluded any
individual from coverage, such exclusion is (i) consistent with the
written terms of the Company Benefit Plan, (ii) enforceable under the
terms of such Plan, (iii) consistent with the terms of any agreement with
such individual (whether written or oral) and (iv) enforceable under
applicable law.
(f) Neither the Company nor any of its Subsidiaries nor, to
the knowledge of the Company, any administrator or fiduciary of any
Company Benefit Plan (or any agent of any of the foregoing) has engaged in
any transaction, or acted or failed to act in any manner which could
subject the Company or Purchaser to any direct or indirect liability (by
indemnity or otherwise) for breach of any fiduciary, co-fiduciary or other
duty under ERISA.
(g) Except as listed on Section 3.11(g) of the Company
Disclosure Schedule, all Company Benefit Plan documents and annual reports
or returns, audited or unaudited financial statements, actuarial
valuations, summary annual reports and summary plan descriptions issued
with respect to the Company Benefit Plans are correct and complete and
have been timely distributed to participants of the Company Benefit Plans
(as required by law).
(h) "Company Benefit Plan" means collectively, each pension,
retirement, profit-sharing, deferred compensation, stock option, employee
stock ownership, severance pay, vacation, bonus or other incentive plan,
any other written or unwritten employee program, arrangement, agreement or
understanding, whether arrived
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at through collective bargaining or otherwise, any medical, vision, dental
or other health plan, any life insurance plan or any other employee
benefit plan or fringe benefit plan, including, without limitation, any
"employee benefit plan," as that term is defined in Section 3(3) of ERISA,
maintained by, sponsored in whole or in part by, or contributed to by the
Company or any of its Subsidiaries for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate. Company Benefit Plans include (but are not limited to)
"employee benefit plans" as defined in Section 3(3) of ERISA and any other
plan, fund, policy, program, practice, custom, understanding or
arrangement providing compensation or other benefits to any current or
former officer or employee or director or independent contractor of the
Company, or any dependent or beneficiary thereof, maintained by the
Company or under which the Company has any obligation or liability,
whether or not they are or are intended to be (i) covered or qualified
under the Code, ERISA or any other applicable law, (ii) written or oral,
(iii) funded or unfunded, (iv) actual or contingent or (v) generally
available to any or all employees (or former employees) of the Company (or
their beneficiaries of dependents), including, without limitation, all
incentive, bonus, deferred compensation, flexible spending accounts,
cafeteria plans, vacation, holiday, medical, disability, share purchase or
other similar plans, policies, programs, practices or arrangements.
(i) Neither Purchaser nor the Company has any liability or
obligation with respect to any Company Benefit Plan (including any
previously adopted Company Benefit Plan) or any other employee benefit,
plan, program, arrangement or policy that covers employees of the Company,
other than those listed on Schedule 3.11 of the Company Disclosure
Schedule or reflected on the 1999 Financial Statements or listed in the
Company SEC Documents.
Section 3.12 Environmental Laws and Regulations.
(a) Except as shown on Section 3.12(a) of the Company
Disclosure Schedule, and except for such failures to comply which would
not, individually or in the, aggregate, be reasonably likely to have a
Company Material Adverse Effect, the Company and each of its Subsidiaries
(i) is and has been in full compliance with all Environmental Laws (as
defined in Section 3.12(b)) and including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern (as defined in Section
3.12(b)) or otherwise relating to the manufacture, generation, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; (ii) has all permits, licenses,
certificates, variances, exemptions, orders, authorizations and approvals
of Governmental Entities ("Permits") required under all applicable
Environmental Laws, except for those Permits which, if the Company or a
Subsidiary did not have, such failure would not have a Company Material
Adverse Effect; and (iii) is in compliance with the
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terms and conditions of such Permits.
(b) For purposes of this Agreement, the term "Environmental
Laws" shall mean any and all codes, laws (including, without limitation,
common law), ordinances, regulations, reporting or licensing requirements,
rules, or statutes relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata), including, without limitation (i) the
Comprehensive Environmental Response Compensation and Liability Act, 42
U.S.C. Sections9601 et seq. ("CERCLA"); (ii) the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. Sections6901 et seq., ("RCRA"); (iii) the Emergency Planning
and Community Right to Know Act (42 U.S.C. Sections11001 et seq.);
(iv) the Clean Air Act (42 U.S.C. Sections 7401 et seq.); (v) the
Clean Water Act (33 U.S.C. I 1251 et seq.); (vi) the Toxic Substances
Control Act (15 U.S.C. I 2601 et seq.); (vii) the Hazardous Materials
Transportation Act (49 U.S.C. Sections 5101 et seq.); (viii) any
state, county, municipal or local statues, laws or ordinances similar or
analogous to the federal statutes listed in parts (i) - (vii) of this
subparagraph, (ix) any amendments to the statutes, laws or ordinances
listed in parts (i) - (viii) of this subparagraph, in existence on the
date hereof, (x) any rules, regulations, guidelines, directives, orders or
the like adopted pursuant to or implementing the statutes, laws,
ordinances and amendments listed in parts (i) - (ix) of this subparagraph
in existence on the date hereof; and (xi) any other law, statute,
ordinance, amendment, rule, regulation, guideline, directive, order or the
like now in effect relating to environmental, health or safety matters.
For purposes of this Agreement, the term "Materials of
Environmental Concern" shall mean any and all chemicals, substances,
wastes, materials, pollutants, contaminants, equipment or fixtures defined
as or deemed hazardous or toxic or otherwise regulated under any
Environmental Law, including, without limitation, RCRA hazardous wastes,
CERCLA hazardous substances, pesticides and other agricultural chemicals,
oil and petroleum products or byproducts and any constituents thereof,
lead or lead-based paints or materials, radon, asbestos or
asbestos-containing materials and polychlorinated biphenyls (PCBs).
(c) Except as shown on Section 3.12(c) of the Company
Disclosure Schedule, and except for such written communications which
would not, individually or in the aggregate, be reasonably likely to have
a Company Material Adverse Effect, neither the Company nor any of its
Subsidiaries has received any written communication whether from a
Governmental Entity, citizens group, employee or otherwise, that alleges
that the Company or any of its Subsidiaries is not in full compliance with
or is potentially liable under any Environmental Laws. In addition, no
Lien has arisen on any properties or assets of the Company or any
Subsidiary under or as a result of any Environmental Law.
(d) Except as shown on Section 3.12(d) of the Company
Disclosure Schedule, and except for such Environmental Claims which would
not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect, the Company has not received written
notice of any claim, action, cause of action, investigation or notice
(together, "Environmental Claims") alleged, filed or being
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<PAGE> 22
conducted by any Person alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting
from (i) the presence, disposal, placement, burial, migration or release,
of any Materials of Environmental Concern at, on, under, to or from any
location or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law, that in either case is
pending or threatened against the Company or any of its Subsidiaries or
against any Person whose liability for any Environmental Claim the Company
or any of its Subsidiaries has retained or assumed either contractually or
by operation of law.
(e) Except as set forth in Section 3.12(e) of the Company
Disclosure Schedule, there has been no disposal, placement, burial or
release of Materials of Environmental Concern by the Company or any
Subsidiary or, to the knowledge of the Company, by any other Person, on,
in, at or from any of the properties or facilities owned or operated by
the Company or any of its Subsidiaries, except for such disposal,
placement, burial or release which would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect.
(f) Without in any way limiting the generality of the
foregoing, except as set forth in Section 3.12(f) of the Company
Disclosure Schedule and, except for any of the matters below which would
not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect, (i) there are no above ground storage
tanks, underground storage tanks, oil/water separators, water treatment
facilities or septic systems located on any property owned, leased,
operated or controlled by the Company or any of its Subsidiaries, (ii)
there is no asbestos contained in or forming part of any building,
building component, structure or office space owned, leased, operated or
controlled by the Company or any of its Subsidiaries and (iii) no PCBs or
PCB-containing items are used or stored at any property owned, leased,
operated or controlled by the Company or any of its Subsidiaries.
(g) Except as set forth in Section 3.12(g) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries are not
subject to any Environmental Laws requiring the performance of site
assessment for Materials of Environmental Concern, or the removal or
remediation of Materials of Environmental Concern, or the giving of notice
to or receiving the approval of any Governmental Entity, or the recording
or delivery to other Persons of any disclosure document or statement
pertaining to environmental matters by virtue of the Merger or as a
condition to the Merger.
Section 3.13 Rights Agreement. The Company has taken all necessary action
so that the execution of this Agreement, announcement or consummation of the
Merger and announcement or consummation of the other transactions contemplated
by this Agreement do not and will not (a) cause the Rights issued pursuant to
the Rights Agreement to separate from the shares of Common Stock to which they
are attached or to be triggered or to become exercisable, (b) cause any Person
to become an Acquiring Person (as such term is defined in the Rights Agreement)
or (c) give rise to a Distribution Date or a Triggering Event (as each such term
is
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<PAGE> 23
defined in the Rights Agreement). The Company has furnished to Purchaser true
and complete copies of all amendments to the Rights Agreement that fulfill the
requirements of this Section 3.13 and such amendments are in full force and
effect.
Section 3.14 Brokers. No broker, finder or investment banker (other than
Credit Suisse First Boston Corporation (the "Financial Advisor")), a true and
correct copy of whose engagement agreement has been provided to Purchaser) is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of the Company.
Section 3.15 Absence of Certain Changes. Except as disclosed in Section
3.15 of the Company Disclosure Schedule or in the Company SEC Documents, since
October 31, 1998, the Company and each of its Subsidiaries have conducted their
respective businesses only in the ordinary course of business and consistent
with past practice and (a) there has not been any Company Material Adverse
Effect and (b) the Company has not taken any of the actions set forth in
paragraphs (a) through (r) of Section 5.1.
Section 3.16 Taxes. Except as set forth in Section 3.16 of the
Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries has (i) duly
filed (or there have been filed on its behalf) with the appropriate Tax
Authorities (as hereinafter defined) all Tax Returns (as hereinafter
defined) required to be filed by it on or prior to the date of this
Agreement, and each such Tax Return is correct and complete in all
material respects and (ii) duly paid in full or, made adequate accruals
and reserves in its books and records in accordance with GAAP with full
provision (or there has been paid or such provision has been made on its
behalf for its sole benefit and recourse) for the payment of, all Taxes
for all periods ending on or prior to the date of this Agreement, except
for those Taxes being contested in good faith.
(b) There are no Liens for Taxes upon any property or assets
of the Company or any Subsidiary thereof, except for Liens for Taxes not
yet due and for which adequate reserves have been established in
accordance with GAAP with full provision made for the payment thereof.
(c) Neither the Company nor any of its Subsidiaries has made
any change in accounting methods, received a ruling from any Tax Authority
or signed an agreement with regard to Taxes reasonably likely to have a
Company Material Adverse Effect.
(d) No Audit (as hereinafter defined) by a Tax Authority is
presently pending with regard to any Taxes or Tax Returns of the Company
or any of its Subsidiaries and, to the knowledge of the Company, no such
Audit is threatened.
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<PAGE> 24
(e) An Audit of each United States federal income Tax Return
of the Company or any of its Subsidiaries has been completed by the
applicable Tax Authorities (or the applicable statutes of limitation for
the assessment of Taxes for such periods have expired) for all periods
through and including 1996, and no adjustments were asserted as a result
of such Audits which have not been finally resolved and fully paid.
(f) There are no agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment or payment of
any Taxes or deficiencies against the Company or any of its Subsidiaries,
and no power of attorney applicable to either the Company or any of its
Subsidiaries with respect to any Taxes is in force.
(g) Neither the Company nor any of its Subsidiaries is a party
to, or is bound by, any agreement, arrangement or policy relating to the
allocation, indemnification or sharing of Taxes.
(h) The Company, as the common parent of an affiliated group
of corporations (as defined in Section 1504 of the Code) consisting solely
of the Company and the Subsidiaries that are "includable corporations"
(within the meaning of Section 1504(b) of the Code), has filed since 1994
a consolidated return for United States federal income Tax purposes on
behalf of itself and such Subsidiaries and neither the Company nor any of
such Subsidiaries has been a member of an affiliated group filing a
consolidated United States federal Tax Return other than the affiliated
group in which they are currently members and of which the Company is the
common parent.
(i) With respect to completed pay periods, the Company and
each of its Subsidiaries has withheld from its employees, independent
contractors, creditors, stockholders, customers and third parties, and
timely paid to the appropriate Tax Authority, proper amounts in all
material respects with all Tax withholding provisions of applicable law.
(j) No power of attorney is currently in force with respect to
any matter relating to Taxes that could affect the Company or any of its
Subsidiaries.
(k) Neither the Company nor any Subsidiary shall become
obligated in connection with the closing of the Merger for the payment of
any amount described in Section 162(m)(1) of the Code.
(l) "Audit" means any audit, assessment or other examination
relating to Taxes by any Tax Authority or any judicial or administrative
proceedings relating to Taxes. "Tax" or "Taxes" means all federal, state,
local and foreign taxes, levies, tariffs, duties (including custom duties)
and other assessments and obligations (including liability with respect to
unclaimed property) of a similar nature (whether imposed directly or
through withholding), including any interest, additions to tax, penalties
or costs applicable or related thereto, imposed, assessed or collected by
any Tax Authority. "Tax
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<PAGE> 25
Authority" means the IRS and any other Governmental Entity (domestic or
foreign) responsible for the administration, assessment or collection of
any Taxes. "Tax Returns" mean all federal, state, local and foreign tax
returns (including information returns), declarations, statements,
reports, requests, schedules and forms, including other documents or
information submitted in connection therewith and any amendments thereto.
Section 3.17 Intellectual Property.
(a) Each of the Company and its Subsidiaries owns or has a
license or other right to use all intellectual property used in and
material to the conduct of its business, including, without limitation,
all patents and patent applications, trademarks, trademark registrations
and applications, copyrights and copyright registrations and applications,
service marks and service names, computer software, technology rights and
licenses, know-how, trade secrets, proprietary processes and formulae,
franchises and inventions (collectively, the "Intellectual Property"),
free and clear of all Liens.
(b) Section 3.17(b) of the Company Disclosure Schedule sets
forth a list of all license agreements (other than license agreements for
non-customized third-party software) under which the Company or any of its
Subsidiaries has granted or received the right to use any Intellectual
Property, and neither the Company nor any of its Subsidiaries is in
default under any such license.
(c) Except as disclosed in the Company SEC Documents or in
Section 3.17(c) of the Company Disclosure Schedule, no Person has a right
to receive a royalty or similar payment in respect of any item of
Intellectual Property pursuant to any contractual arrangements entered
into by the Company or any of its Subsidiaries or otherwise. To the
knowledge of the Company, no former or present employees, officers or
directors of the Company or any Subsidiary hold any right, title or
interest, directly or indirectly, in whole or in part, in or to any
Intellectual Property.
(d) There are no claims or suits pending or, to the knowledge
of the Company, threatened (i) alleging that the conduct of the Company's
or any of its Subsidiary's business infringes upon or constitutes the
unauthorized use of the proprietary rights of any third party or (ii)
challenging the ownership, use, validity or enforceability of the
Intellectual Property. To the knowledge of the Company, no Intellectual
Property of the Company or any Subsidiary is being violated or infringed
upon by any third party. There are no settlements, consents, judgments,
orders or other agreements which restrict the Company's or any of its
Subsidiary's rights to use any Intellectual Property.
(e) Except as set forth in the Company SEC Documents or in
Section 3.17(e) of the Company Disclosure Schedule, the Company has made
no binding commitments to make any material expenditure in relation to the
hardware or software or communications systems used or planned to be used
in connection with the Company's business. All material computer equipment
and systems used by any of the Company and its Subsidiaries and, to the
knowledge of the Company, any major supplier of the
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<PAGE> 26
Company or its Subsidiaries recognize the advent of the year 2000 and can
correctly recognize and manipulate date information relating to dates on
or after January 1, 2000, and the operation and functionality of such
computer systems has not been adversely affected by the advent of the year
2000 or any manipulation of data featuring date information relating to
dates before, on or after January 1, 2000, in each case, except for such
failures to recognize, manipulate, operate or function as would not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.18 Labor Matters.
(a) (i) There is no labor strike, dispute, slowdown, stoppage
or lockout actually pending, or to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries,
(ii) except as discussed on Section 3.18(a)(ii) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to or
bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the
Company or any of its Subsidiaries, (iii) except as disclosed on Section
3.18(a)(iii) of the Company Disclosure Schedule, none of the employees of
the Company or any of its Subsidiaries is represented by any labor
organization and the Company does not have any knowledge of any union
organizing activities among the employees of the Company or any of its
Subsidiaries, (iv) there are no written personnel policies, rules or
procedures applicable to employees of the Company or any of its
Subsidiaries, other than the Company Benefit Plans and those set forth on
Section 3.18(a)(iv) of the Company Disclosure Schedule, true and correct
copies of which have heretofore been delivered or made available to
Purchaser, (v) each of the Company and its Subsidiaries is, and has at all
times been, in compliance, in all material respects, with all applicable
laws and regulations respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety
and health, and is not engaged in any unfair labor practices as defined in
the National Labor Relations Act or other applicable laws, except for such
non-compliance which has not had a Company Material Adverse Effect, (vi)
there is no unfair labor practice charge or complaint against the Company
pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency,
(vii) there is no material pending grievance arising out of any collective
bargaining agreement or other grievance procedure and (viii) to the
knowledge of the Company, no charges with respect to or relating to the
Company are pending before the Equal Employment Opportunity Commission or
any other agency responsible for the prevention of unlawful employment
practices which, if determined adversely to the Company, would have or
could reasonably be expected to have a Company Material Adverse Effect.
(b) In any ninety (90)-day period during the twelve (12)
months ending on the date of the Agreement, (i) neither the Company nor
any of its Subsidiaries has
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effectuated a "plant closing," (as defined in the Worker Adjustment and
Retraining Notification Act (the "WARN Act")) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company and (ii) there has not occurred a
"mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of the Company or any of its Subsidiaries; nor has
the Company or any of its Subsidiaries been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to
trigger application of any similar state, local or foreign law or
regulation.
Section 3.19 Opinion of Financial Advisor. The Financial Advisor has
delivered its opinion, dated the date of this Agreement, to the Special
Committee and the Board to the effect that, as of such date, and based upon and
subject to the matters stated in the opinion, the Merger Consideration to be
received in the Merger by the holders of Shares (other than Purchaser and its
affiliates) is fair from a financial point of view to such holders. A copy of
the written opinion will be delivered to Purchaser promptly following receipt
thereof by the Special Committee.
Section 3.20 Real Property.
(a) Section 3.20 of the Company Disclosure Schedule sets forth
a complete list of all real property owned or leased by the Company or any
of its Subsidiaries or otherwise used by the Company or any of its
Subsidiaries in, and material to, the conduct of their business or
operations (collectively, together with all buildings, structures and
other improvements and fixtures located on or under the land described in
this Section 3.20 and all easements, rights and other appurtenances
thereto, the "Real Property"). The Company or its Subsidiaries has good
title to the owned Real Property and good leasehold interests in the
leased Real Property, free and clear of all Liens. Copies of (i) all
deeds, title insurance policies (including copies of exception documents
thereunder) and surveys of the Real Property and (ii) all documents
evidencing all Liens upon the Real Property, to the extent such are in the
files and records of the Company, have been furnished or made available to
Purchaser or will be furnished or made available to Purchaser as promptly
as practicable after the date of this Agreement. Except for the matters
disclosed in the Company SEC Documents or in Section 3.20 of the Company
Disclosure Schedule, there are no proceedings, claims, disputes or, to the
Company's knowledge, conditions affecting any Real Property that would
reasonably be expected to curtail or interfere with the use of such
property, nor is an action of rezoning or eminent domain pending or, to
the knowledge of the Company, threatened for all or any portion of the
Real Property.
(b) All buildings on the Real Property are free of material
title and physical defects which do not have, individually or in the
aggregate, a Company Material Adverse Effect.
(c) Each of the Company and its Subsidiaries has obtained all
appropriate certificates, licenses, permits, easements and rights of way,
including proofs of dedication, required to use and operate the Real
Property in the manner in which the Real Property is currently being used
and operated, except for such easements,
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<PAGE> 28
certificates, licenses, permits or rights of way the failure of which to
have obtained does not have, individually or in the aggregate, a Company
Material Adverse Effect.
(d) To the Company's knowledge, neither the Company nor any of
its Subsidiaries is in violation in any material respect of any applicable
building, zoning, health or other law, ordinance, regulation, contractual
restriction or covenant in respect of the use or occupation of the Real
Property or structures or their operations thereon.
Excluded from the scope of this representation and
warranty are all matters related to Environmental Laws, Materials of
Environmental Concern or Environmental Claims; these excluded matters, to
the extent subject to a representation and warranty under this Agreement,
are covered by Section 3.12.
Section 3.21 Material Contracts.
(a) Section 3.21(a) of the Company Disclosure Schedule lists
each of the following contracts and agreements of the Company and each of
its Subsidiaries (such contracts and agreements, together with all
contracts and agreements disclosed in Section 3.17(b) of the Disclosure
Schedule, being "Material Contracts"):
(i) each contract, agreement and other arrangement for
the purchase of inventory, spare parts, other materials or personal
property with any supplier or for the furnishing of services to the
Company or any of its Subsidiaries or otherwise related to the
businesses of the Company or any of its Subsidiaries under the terms
of which the Company or any of its Subsidiaries: (A) have paid or
otherwise given consideration of more than $50,000 in the aggregate
during the fiscal year ended October 31, 1999 or (B) are likely to
pay or otherwise give consideration of more than $250,000 in the
aggregate over the remaining term of such contract;
(ii) each contract, agreement and other arrangement for
the sale of inventory or other personal property or for the
furnishing of services by the Company or any of its Subsidiaries
which: (A) is likely to involve consideration of more than $50,000
in the aggregate during the fiscal year ended October 31, 1999 or
(B) is likely to involve consideration of more than $100,000 in the
aggregate over the remaining term of the contract;
(iii) all material broker, distributor, dealer,
manufacturer's representative, franchise, agency, consulting and
advertising contracts and agreements to which the Company or any of
its Subsidiaries is a party;
(iv) all management contracts (including those relating
to severance, change of control, termination or retirement) and
contracts with independent contractors or consultants (or similar
arrangements) to which the Company or any of its Subsidiaries is a
party and which provide for payments to any Person in any calendar
year in excess of $50,000;
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(v) all contracts and agreements relating to
Indebtedness of the Company or any of its Subsidiaries in
excess of $25,000 or to any direct or indirect guaranty by the
Company or any of its Subsidiaries of Indebtedness of any
other Person in excess of $25,000;
(vi) all contracts and agreements that limit
or purport to limit the ability of the Company or any of its
Subsidiaries to compete in any line of business or with any
Person or in any geographic area or during any period of time;
(vii) any exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or
collar financial contract or any other interest rate or
foreign currency protection contract not included on its
balance sheet which is a financial derivative contract;
(viii) any other contract or amendment
thereto that would be required to be filed as an exhibit to a
Form 10-K filed by Company with the SEC as of the date of this
Agreement (excluding this Agreement or any other agreements
contemplated by or related to this Agreement or the Merger);
(ix) all contracts and agreements that
provide indemnification rights or obligations of the Company
or any of its Subsidiaries, which provide for potential
payments after the Effective Time to any Person in excess of
$250,000; and
(x) all other contracts and agreements,
whether or not made in the ordinary course of business, which
are material to the Company and its Subsidiaries, taken as a
whole, or to the conduct of the business of the Company and
its Subsidiaries, taken as a whole, or the absence of which
would, in the aggregate, have or reasonably be expected to
have a Company Material Adverse Effect.
(b) Each Material Contract: (i) is legal, valid and
binding on the Company or the respective Subsidiary which is a party
thereto and, to the knowledge of the Company, the other parties
thereto, and is in full force and effect and (ii) upon consummation of
the Merger, except to the extent that any consents set forth in Section
3.6 of the Company Disclosure Schedule are not obtained, shall continue
in full force and effect without penalty or other adverse consequence.
Except as set forth in Section 3.21(b) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries (x) is in
breach of, or default under, any Material Contract or (y) to the
knowledge of the Company, has repudiated or waived any material
provision thereunder.
(c) Except as shown at Section 3.21 of the Company
Disclosure Schedule,
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no other party to any Material Contract is, to the knowledge of the
Company, in material breach thereof or material default thereunder.
(d) Except as set forth in Section 3.21(d) of the
Company Disclosure Schedule, there is no contract, agreement or other
arrangement granting any Person any preferential right to purchase any
Company Securities or any properties or assets of the Company or any of
its Subsidiaries.
Section 3.22 Suppliers and Customers. Since October 31, 1998, no
material licensor, vendor, supplier, licensee or customer of the Company or any
of its Subsidiaries has canceled or otherwise modified (in a manner materially
adverse to the Company) its relationship with the Company or its Subsidiaries
and, to the Company's knowledge, (a) no such Person has notified the Company or
any of its Subsidiaries of its intention to do so and (b) the consummation of
the Merger will not affect any of such relationships in a manner that would
result in a Company Material Adverse Effect.
Section 3.23 Accounts Receivable, Inventory.
(a) The accounts receivable of the Company and its
Subsidiaries as set forth on the most recent consolidated balance sheet
included in the 1999 Financial Statements (the "Company Balance Sheet")
delivered prior to the date of this Agreement or arising since the date
thereof are valid and genuine; have arisen out of bona fide sales and
deliveries of goods, performance of services and other business
transactions in the ordinary course of business consistent with past
practice; and are not subject to valid defenses, set-offs or
counterclaims. The allowance for collection losses on the Company
Balance Sheet and reserves for the return of inventory have been
determined in accordance with GAAP consistently applied and, to the
knowledge of the Company, are sufficient to provide for any losses or
returns which may be sustained on realization of the accounts
receivable or return of inventory shown in the Company Balance Sheet.
(b) As of the date of the Company Balance Sheet, the
inventories shown on the Company Balance Sheet consisted in all
material respects of items of a quantity and quality usable or saleable
in the ordinary course of business. All of such inventories were
acquired in the ordinary course of business. All such inventories are
valued on the Company Balance Sheet in accordance with GAAP, applied on
a basis consistent with the Company's past practices.
Section 3.24 Insurance. Section 3.24 of the Company Disclosure Schedule
lists the Company's material insurance policies. Such policies are in adequate
amounts and cover risks customarily insured against by businesses of the type
operated by the Company and its Subsidiaries. All such policies are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the date of this Agreement have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies will remain in full force and effect through the respective dates
set forth in Section 3.24 of the Company Disclosure Schedule. Except as set
forth in Section 3.24 of the Company Disclosure Schedule, there are presently no
claims for amounts exceeding in any individual case $250,000
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pending under such policies of insurance and no notices of claims in excess of
such amounts have been given by the Company or any of its Subsidiaries under
such policies.
Section 3.25 Title and Condition of Properties. The Company and its
Subsidiaries own good title, free and clear of all Liens, to all of the personal
property and assets shown on the Company Balance Sheet, except for assets which
have been disposed of to nonaffiliated third parties since the date of the
Company Balance Sheet, in the ordinary course of business. All of the machinery,
equipment and other tangible personal property and assets owned or used by the
Company or its Subsidiaries are in good condition and repair, except for
ordinary wear and tear not caused by neglect and are usable in the ordinary
course of business, except for any matter otherwise covered by this sentence
which would not have, individually or in the aggregate, a Company Material
Adverse Effect. All assets which are material to the Company's business on a
consolidated basis and held under leases or subleases by the Company or any of
its Subsidiaries are held under valid contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such contract is in full force and effect.
Section 3.26 Statements True and Correct. No representation or warranty
of the Company contained in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 3.27 Board Recommendation. The Board, at a meeting duly called
and held, has by unanimous vote of those directors present (who constituted all
of the directors then in office) (a) determined that this Agreement and the
Merger are fair to and in the best interests of the shareholders of the Company
(other than Purchaser or any affiliate thereof) and (b) resolved to recommend
that such holders of the shares of Common Stock approve and adopt this Agreement
and approve the Merger.
Section 3.28 Required Vote. The affirmative vote of the holders of
shares of Common Stock representing a majority of all shares entitled to vote at
the Shareholders' Meeting is required to approve and adopt this Agreement and
approve the Merger. No other vote of the shareholders of the Company is required
by law, the Restated Articles, the Bylaws of the Company or otherwise in order
for the Company to consummate the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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Purchaser hereby represents and warrants to the Company as follows:
Section 4.1 Organization. Each of Purchaser and Acquisition Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. Each of Purchaser and Acquisition Sub has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
Section 4.2 Authority Relative to this Agreement. Each of Purchaser and
Acquisition Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the Merger in accordance with the terms
hereof. The execution, delivery and performance of this Agreement by Purchaser
and Acquisition Sub and the consummation of the Merger by Purchaser and
Acquisition Sub have been duly and validly authorized by the Board of Directors
of Purchaser and the Board of Directors of Acquisition Sub, and no other
corporate action or other proceedings on the part of Purchaser or Acquisition
Sub are necessary to authorize the execution and delivery by Purchaser and
Acquisition Sub of this Agreement or to consummate the Merger. This Agreement
has been duly and validly executed and delivered by Purchaser and Acquisition
Sub and, assuming due and valid authorization, execution and delivery by the
Company, constitutes a valid, legal and binding agreement of Purchaser and
Acquisition Sub, enforceable against Purchaser and Acquisition Sub in accordance
with its terms, (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought).
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, state securities or blue sky
laws, the HSR Act and the filing and recordation of a Certificate of Merger as
required by the GBCC, no filing with or notice to, and no permit, authorization,
consent or approval of, any Governmental Entity is necessary for the execution
and delivery by Purchaser or Acquisition Sub of this Agreement or the
consummation by Purchaser or Acquisition Sub of the Merger, except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings or give such notice would not have a Purchaser Material Adverse
Effect. Neither the execution, delivery or performance of this Agreement by
Purchaser or Acquisition Sub, nor the consummation by Purchaser and Acquisition
Sub of the Merger, will (a) conflict with or result in any breach of any
provision of the Certificate or Articles of Incorporation or Bylaws of Purchaser
or Acquisition Sub, (b) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) or require any
consent pursuant to, or result in the creation of any Lien on any asset of
Purchaser or Acquisition Sub under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Purchaser or Acquisition Sub is a party
or by which either of them or any of their respective properties or assets may
be bound or (c) violate any order, writ, injunction, decree, law, statute, rule
or regulation applicable to Purchaser or Acquisition Sub or any of their
respective properties or assets, except in the case of (b) or (c) for any such
violations, breaches, defaults (or rights of termination, amendment,
cancellation or acceleration), Liens or failures to
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obtain consents which would not individually or in the aggregate, have a
Purchaser Material Adverse Effect. As used in this Agreement, the term
"Purchaser Material Adverse Effect" shall mean any change or effect that is
materially adverse to the business, results of operations or condition
(financial or otherwise) of Purchaser or Acquisition Sub other than any change
or effect that does not affect Purchaser's or Acquisition Sub's ability to
perform its obligations under this Agreement.
Section 4.4 Proxy Statement. None of the information supplied by
Purchaser in writing for inclusion in the Proxy Statement or Schedule 13E-3
will, at the respective times filed with the SEC and first published or sent or
given to holders of Shares, and in the case of the Proxy Statement, at the time
that it or any amendment or supplement thereto is mailed to the Company's
shareholders, at the time of the Shareholders' Meeting or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Schedule 13E-3 will, when filed by Purchaser with the SEC,
comply as to form in all material respects with the provisions of the Exchange
Act and the SEC's rules and regulations promulgated thereunder.
Section 4.5 Financing. Purchaser has provided the Company with complete
and correct copies of (a) a commitment letter dated December 6, 1999 from Fleet
Capital Corporation pursuant to which it has committed, subject to the terms and
conditions set forth therein, to provide a senior credit facility in an
aggregate amount of $315 million (the "Senior Commitment Letter") and (b) a
commitment letter dated January 13, 2000 from J.H. Whitney & Co. pursuant to
which it has committed, subject to the terms and conditions set forth therein,
to purchase subordinated notes in an aggregate amount of $55 million
(collectively, the "Financing Commitments," and the financing to be provided
pursuant to the foregoing, the "Financing"). As of the date hereof, the
Financing Commitments have not been withdrawn. If such Financing has been
obtained at the Effective Time, Purchaser will have available $55 million in
equity for purposes of financing the Merger.
Section 4.6 Brokers. Except as set forth in a disclosure letter to be
provided separately to the Company by Purchaser, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of
Purchaser.
Section 4.7 No Default. Neither Purchaser nor Acquisition Sub is in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term, condition
or provision of (a) its Articles of Incorporation or Bylaws, (b) any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Purchaser or Acquisition Sub is now a party or by which any
of them or any of their respective properties or assets may be bound or (c) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
Purchaser or Acquisition Sub or any of their respective properties or assets,
except in the case of (b) or (c) for violations, breaches or defaults that would
not, individually or in the aggregate, have a Purchaser Material Adverse Effect.
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Section 4.8 Litigation. Except as would not reasonably be expected to
have a Purchaser Material Adverse Effect, there is no Litigation pending or, to
the knowledge of Purchaser, threatened against, affecting or involving Purchaser
or Acquisition Sub or any of their respective properties or assets before any
Governmental Entity, and neither Purchaser nor Acquisition Sub is subject to any
outstanding order, writ, injunction or decree.
Section 4.9 Compliance with Applicable Law. Purchaser and Acquisition
Sub hold all permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Purchaser Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
Purchaser and Acquisition Sub are in compliance with the terms of the Purchaser
Permits, except where the failure so to comply would not have a Purchaser
Material Adverse Effect. The businesses of Purchaser and Acquisition Sub are not
being and have not been conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for violations or possible
violations which, individually or in the aggregate, would not have a Purchaser
Material Adverse Effect. None of the directors, officers, agents,
representatives or employees of Purchaser or Acquisition Sub (in their capacity
as directors, officers, agents, representatives or employees) has taken any
action or made any omission which would violate any law, ordinance or regulation
of any Governmental Entity, except for violations or possible violations which,
individually or in the aggregate, would not have a Purchaser Material Adverse
Effect. No investigation or review by any Governmental Entity with respect to
Purchaser or Acquisition Sub or with respect to any of their respective
directors, officers, agents, representatives or employees (in regard to actions
taken or omissions made in their capacity as directors, officers, agents,
representatives or employees) is pending or, to the knowledge of Purchaser,
threatened.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as expressly
contemplated by this Agreement, during the period from the date hereof until the
Effective Time, each of the Company and its Subsidiaries will conduct its
operations in the ordinary course of business consistent with past practice and
preserve intact its business organization and assets and maintain its rights and
franchises. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, until the Effective Time the
Company will not, and the Company will not permit its Subsidiaries to, without
the prior written consent of Purchaser (which will not be unreasonably withheld
or delayed):
(a) amend or propose to amend the charter, bylaws or
other governing instruments of the Company or any of its Subsidiaries;
(b) authorize for issuance, issue, sell, deliver, or
agree or commit to issue, sell or deliver, dispose of, encumber or
pledge (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or
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otherwise) any stock of any class or any securities, except as
disclosed at Section 5.1(b) of the Company Disclosure Schedule or as
required by agreements with the Company's employees under the Company
Benefit Plans as in effect as of the date hereof, or amend any of the
terms of any such securities or agreements outstanding as of the date
hereof, except as specifically contemplated by this Agreement;
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or redeem or otherwise
acquire any of its securities, except intercompany cash dividends in
the ordinary course of business;
(d) (i) incur or assume any long-term or short-term
debt or issue any debt securities, except for borrowings under existing
lines of credit in the ordinary course of business and in amounts not
in excess of an aggregate of $1,000,000 (on a consolidated basis); (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other Person, except in the ordinary course of business consistent
with past practice and in amounts not material to the Company and its
Subsidiaries, taken as a whole, and except for obligations of wholly
owned Subsidiaries of the Company to the Company or to other wholly
owned Subsidiaries of the Company; (iii) make any loans, advances or
capital contributions to, or investments in, any other Person (other
than to wholly owned Subsidiaries of the Company or customary loans or
advances to employees in the ordinary course of business consistent
with past practice and in amounts not material to the maker of such
loan or advance) or make any change in its existing borrowing or
lending arrangements for or on behalf of any such Person, whether
pursuant to, a Company Benefit Plan or otherwise; (iv) pledge or
otherwise encumber shares of capital stock of the Company or any of its
Subsidiaries; or (v) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material Lien
thereupon;
(e) adopt a plan of complete or partial liquidation
or adopt resolutions providing for the complete or partial liquidation,
dissolution, consolidation, merger, restructuring or recapitalization
of the Company or any of its Subsidiaries;
(f) (i) make any change in the compensation payable
or to become payable to any of its officers, directors, employees,
agents or consultants (other than general increases in wages to
employees in the ordinary course consistent with past practice as
disclosed in Section 5.1(f) of the Company Disclosure Schedule) or to
Persons providing management services; (ii) pay any severance or
termination cost or any bonus other than pursuant to written contracts
in effect on the date of this Agreement or disclosed in Section 5.1(f)
of the Company Disclosure Schedule or enter into or amend any severance
agreements with officers of the Company or any Subsidiary; (iii) make
any loans to any of its officers, directors, employees, affiliates,
agents or consultants; (iv) adopt, amend or terminate any new or
existing Company Benefit Plan (other than as required by applicable
law); or (v) permit a new Option Period (as such term is defined in the
Employee Stock Purchase Plan) to commence under the Employee Stock
Purchase
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Plan after the Shareholders' Meeting;
(g) acquire, sell, transfer, lease, encumber or
dispose of any assets outside the ordinary course of business or any
assets which in the aggregate are material to the Company and its
Subsidiaries, taken as a whole, or enter into any commitment or
transaction outside the ordinary course of business consistent with
past practice which would be material to the Company and its
Subsidiaries, taken as a whole;
(h) except as may be required as a result of a change
in law or in GAAP, change any of the Tax or accounting principles or
practices used by it or make any material Tax election or amend any Tax
Return previously filed or settle any material Audit;
(i) revalue in any material respect any of its
assets, including, without limitation, writing down the value of
inventory or writing-off notes or accounts receivable other than in the
ordinary course of business;
(j) (i) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof or any equity interest
therein; (ii) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice which would
be material to the Company and its Subsidiaries, taken as a whole;
(iii) authorize any new capital expenditure or expenditures which,
individually, is in excess of $50,000 or, in the aggregate, are in
excess of $100,000, except for the budgeted capital expenditures listed
in Section 5.1(j) of the Company Disclosure Schedule; or (iv) enter
into or amend any contract, agreement commitment or arrangement
providing for the taking of any action that would be prohibited
hereunder;
(k) discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities fully reflected or reserved
against in, or contemplated by, the consolidated 1999 Financial
Statements (or the notes thereto) of the Company and its Subsidiaries
or incurred in the ordinary course of business consistent with past
practice;
(l) permit any insurance policy naming the Company as
a beneficiary or a loss payable payee to be canceled or terminated
without notice to Purchaser, unless the Company shall have obtained a
comparable replacement policy;
(m) enter into or amend any employment contract
between the Company or any Subsidiary and any Person having a base
salary thereunder in excess of $100,000 per year (unless such amendment
is required by law) that the Company or any Subsidiary does not have
the unconditional right to terminate without liability (other than
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liability for services already rendered), at any time on or after the
Effective Time;
(n) commence or settle any Litigation other than in
accordance with past practice and, with respect to any settlement, for
an amount greater than $250,000;
(o) enter into, modify, amend or terminate any
Material Contract (including any standstill agreement, loan contract
with an unpaid balance exceeding $250,000 or any of the agreements
referred to in Section 5.10 hereof) or waive, release, compromise or
assign any material rights or claims, except in the ordinary course of
business;
(p) take any action that would adversely affect the
ability of any party to this Agreement to perform its covenants and
agreements under this Agreement;
(q) take any action that would cause an event of
default under any Material Contract;
(r) cause (or permit to exist) any circumstances that
would result in a Company Material Adverse Effect; or
(s) take, or agree in writing or otherwise to take,
any of the actions described in Sections 5.1(a) through 5.1(r) or any
action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect as of the date
when made.
Section 5.2 Acquisition Proposals. Except as hereinafter provided,
neither the Company nor any of its Subsidiaries shall, directly or indirectly,
through any officer, director, agent or otherwise, solicit, initiate or
knowingly encourage the submission of any proposal or offer from any Person (as
hereinafter defined) relating to any acquisition or purchase of all or (other
than in the ordinary course of business) a substantial portion of the assets of,
or a substantial equity interest in, the Company or any of its Subsidiaries or
any recapitalization, business combination or similar transaction with the
Company or any of its Subsidiaries (any such proposal or offer being an
"Acquisition Proposal") or participate in any negotiations regarding, or furnish
to any other Person any non-public information with respect to, or take any
other action to knowingly facilitate the making of an Acquisition Proposal.
Notwithstanding the foregoing provisions of this Section 5.2, (a) the Company
may engage in discussions or negotiations with a third party who seeks to
initiate such discussions or negotiations and may furnish such third party
information concerning the Company and its Subsidiaries, in each case only in
response to a request for such information or access which was not solicited,
initiated or knowingly encouraged by the Company or any of its affiliates, (b)
the Board or the Special Committee may take and disclose to the Company's
shareholders a position contemplated by Rule l4e-2 promulgated under the
Exchange Act and (c) following receipt of an Acquisition Proposal from a third
party, the Board or the Special Committee may withdraw or modify its
recommendation referred to in Section 1.10, but in each case referred to in the
foregoing clauses (a) through (c) only to the extent that the Board or the
Special Committee shall conclude in good faith after consultation with legal
counsel that the failure to take such action could reasonably be
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determined to be a breach of the Board's or the Special Committee's fiduciary
obligations to the Company's shareholders under applicable law. In connection
with any party's Acquisition Proposal, the Company will enter into an
appropriate confidentiality agreement with such party. The Company will
immediately cease all existing activities, discussions and negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. From and
after the execution of this Agreement, the Company shall promptly notify
Purchaser of the receipt of any Acquisition Proposal, and, in any such notice to
Purchaser, shall indicate in reasonable detail the material terms thereof and
the identity of the other party or parties involved. Nothing in this Section 5.2
shall preclude the Company from making any disclosure to its shareholders that
is required under applicable law. As used in this Agreement, "Person" shall mean
a natural person, entity, organization or association, including, but not
limited to, a partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Entity, group acting in concert or any person acting in a
representative capacity.
Section 5.3 Access to Information.
(a) Between the date hereof and the Effective Time,
the Company will give Purchaser and its authorized representatives and
Persons providing or committed to provide Purchaser with financing for
the Merger and their representatives, reasonable access to all
employees, plants, offices, warehouses and other facilities and
properties and to all books and records of the Company and its
Subsidiaries, will permit Purchaser to make such inspections (including
any physical inspections or soil or groundwater investigations) as it
may reasonably request and will cause the Company's officers and those
of its Subsidiaries to furnish Purchaser with such financial and
operating data and other information with respect to the business and
properties of the Company and any of its Subsidiaries as Purchaser may
from time to time reasonably request.
(b) Each of the Company and the Purchaser will hold
and will cause its consultants, advisors, representatives, agents and
employees, including, without limitation, its auditors, attorneys,
financial advisors and other consultants and advisors (including
financing sources), to hold in confidence, unless compelled to disclose
by judicial or administrative process or, in the written opinion of its
legal counsel, by other requirements of law, all documents and
information concerning the other party furnished to it in connection
with this Agreement (except to the extent that such information can be
shown to have been (i) previously known by the disclosing party from
sources other than the other party, its directors, officers,
representatives or affiliates, (ii) in the public domain through no
fault of the disclosing party or its affiliates or (iii) later lawfully
acquired by the disclosing party on a non-confidential basis from other
sources who are not known by the disclosing party to be bound by a
confidentiality agreement or otherwise prohibited from transmitting the
information to the disclosing party by a contractual, legal or
fiduciary obligation) and will not release or disclose such information
to any other Person, except its auditors, attorneys, financial advisors
and
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other consultants and advisors (including financing sources) in
connection with this Agreement who need to know such information. If
the Merger is not consummated, such confidence shall be maintained and,
if requested by or on behalf of the Company or the Purchaser, the other
party hereto will, and will use all reasonable efforts to cause its
auditors, attorneys, financial advisors and other consultants, agents
and representatives to return or destroy all copies of written
information furnished by the Company or Purchaser, as applicable, for
purposes of evaluating the Merger. It is understood that each of the
parties hereto shall be deemed to have satisfied its obligation to hold
such information confidential if it exercises the same care as it takes
to preserve confidentiality for its own similar information.
(c) Prior to the consummation of the Merger, the
Company and its accountants, counsel, agents and other representatives
shall cooperate with Purchaser by providing information about the
Company which is reasonably necessary for Purchaser and its
accountants, counsel, agents and other representatives to prepare the
syndication or other materials to be delivered to potential financing
sources in connection with the Merger (the "Financing Documents") and
such other documents and information with respect to such documents as
may be reasonably requested. Notwithstanding anything in this Agreement
to the contrary, Purchaser may disclose, or cause its representatives
to disclose, and at the request of Purchaser, the Company shall
disclose, information concerning the Company and its Subsidiaries, and
their respective businesses, assets and properties, and the Merger in
the Financing Documents and to prospective financing sources in
connection with the Merger.
(d) Each party hereto agrees to give the other party
notice as soon as practicable after any determination by it of any fact
or occurrence relating to the other party which it has discovered
through the course of its investigation and which represents, or is
reasonably likely to represent, either a material breach of any
representation, warranty, covenant or agreement of the other party or
which has had or is reasonably likely to have a Company Material
Adverse Effect or a Purchaser Material Adverse Effect, as applicable.
Section 5.4 Additional Agreements; Reasonable Efforts.
(a) Prior to the consummation of the Merger upon the
terms and subject to the conditions of this Agreement, each of
Purchaser, Acquisition Sub and the Company agree to use its
commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the Merger as promptly as
practicable, including, but not limited to, (i) the preparation and
filing of all forms, registrations and notices required to be filed to
consummate the Merger and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or
waivers by any third party or Governmental Entity, (ii) the preparation
of any Financing Documents reasonably requested by Purchaser, (iii) the
satisfaction of the other parties' conditions to the consummation of
the Merger and (iv) obtaining consents of all third parties necessary,
proper or advisable for the consummation of the Merger. In addition, no
party hereto
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shall take any action after the date hereof that would reasonably be
expected to materially delay the obtaining of, or result in not
obtaining, any permission, approval or consent from any Governmental
Entity necessary to be obtained prior to the consummation of the
Merger.
(b) Prior to the consummation of the Merger, each
party hereto shall promptly consult with the other parties hereto with
respect to, provide any necessary information with respect to and
provide the other parties (or their counsel) copies of, all filings
made by such party with any Governmental Entity or any other
information supplied by such party to a Governmental Entity in
connection with this Agreement and the Merger. Each party hereto shall
promptly inform the other parties of any communication from any
Governmental Entity regarding the Merger. If any party hereto or
affiliate thereof receives a request for additional information or
documentary material from any such Governmental Entity with respect to
the Merger, then such party will endeavor in good faith to make, or
cause to be made, as soon as reasonably practicable and after
consultation with the other parties, an appropriate response in
compliance with such request. To the extent that transfers of Company
Permits are required as a result of execution of this Agreement or
consummation of the Merger, the Company shall use commercially
reasonable efforts to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this
Agreement shall be deemed to require Purchaser to (i) enter into any
agreement with any Governmental Entity or to consent to any order,
decree or judgment requiring Purchaser to hold separate or divest, or
to restrict the dominion or control of Purchaser or any of its
affiliates over, any of the assets, properties or businesses of
Purchaser, its affiliates or the Company, in each case as in existence
on the date hereof, or (ii) defend against any Litigation brought by
any Governmental Entity seeking to prevent the consummation of the
Merger.
(d) The Company agrees to use reasonable efforts to
assist Purchaser in connection with structuring or obtaining the
Financing in connection with consummation of the Merger.
Section 5.5 Public Announcements. Each of Purchaser and the Company
agrees that it will not issue any press release or otherwise make any public
statement with respect to this Agreement or the Merger without the prior consent
of the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
consent if (a) the disclosure is required by law or by obligations pursuant to
any listing agreement with any national securities exchange and (b) the party
making such disclosure has first used reasonable efforts to consult with the
other party about the form and substance of such disclosure.
Section 5.6 Indemnification.
(a) Purchaser agrees that all rights to
indemnification or exculpation now existing in favor of the present and
former directors, officers, employees and agents of the Company and its
Subsidiaries as provided in their respective charters or bylaws or
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otherwise in effect as of the date hereof with respect to matters
occurring prior to the Effective Time shall survive the Merger and
shall continue in full force and effect and shall not be amended,
repealed or otherwise modified for a period of six and one-half (6 1/2)
years from the Effective Time in any manner that would affect adversely
the rights thereunder of individuals who prior to or at the Effective
Time were such present or former directors, officers, employees or
agents of the Company or its Subsidiaries.
(b) Purchaser shall cause the Surviving Corporation
to maintain in effect for not less than five (5) years from the
Effective Time the policies of the directors' and officers' liability
and fiduciary insurance most recently maintained by the Company
(provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions
which are not materially less favorable to the beneficiaries thereof so
long as such substitution does not result in gaps or lapses in
coverage) with respect to matters occurring prior to the Effective
Time, provided that in no event shall the Surviving Corporation be
required to expend more than an amount per year equal to 200% of the
current annual premiums paid by the Company (the "Premium Amount") to
maintain or procure insurance coverage pursuant hereto, and further
provided that if the Surviving Corporation is unable to obtain the
insurance called for by this Section 5.6(b), the Surviving Corporation
will obtain the maximum insurance coverage obtainable for the Premium
Amount per year.
(c) After the Effective Time, Purchaser and the
Surviving Corporation shall, to the fullest extent that a Georgia
corporation may now or hereafter legally indemnify its own officers and
directors, indemnify and hold harmless, each present director or
officer of the Company and each Subsidiary (collectively, the
"Indemnified Parties") against all costs and expenses (including
attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether asserted or
commencing before or after the Effective Time), whether civil,
criminal, administrative or investigative, arising out of or pertaining
to any action or omission in their capacity as an officer or director
occurring before or at the Effective Time (including, without
limitation, the Merger and all actions taken in contemplation of, or to
effect the Merger), for a period of six and one-half (6 1/2) years
after the date hereof. Without limiting the generality of the
foregoing, in the event of any such claim, action, suit, proceeding or
investigation, (i) the Surviving Corporation or Purchaser, as the case
may be, shall pay as incurred, each Indemnified Party's legal and other
expenses (including costs of investigation and preparation), including
the fees and expenses of counsel selected by the Indemnified Party,
which counsel shall be reasonably satisfactory to the Surviving
Corporation or Purchaser, promptly after statements therefor are
received and (ii) the Surviving Corporation and Purchaser shall
cooperate in the defense of any such matter; provided, however, that
neither the Surviving Corporation nor Purchaser shall be liable for any
settlement effected without its written consent (which consent shall
not be unreasonably withheld or delayed); and provided further that
neither the Surviving Corporation nor
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Purchaser shall be obligated pursuant to this Section 5.6(c) to pay the
fees and expenses of more than one (1) counsel for all Indemnified
Parties in any single action, except to the extent that two (2) or more
of such Indemnified Parties shall have conflicting interests in the
outcome of such action; and provided further that, in the event that
any claim for indemnification is asserted or made within such six and
one-half (6 1/2) year period, all rights to indemnification in respect
of such claim shall continue until the disposition of such claim. The
parties intend, to the extent not prohibited by applicable law, that
the indemnification provided for in this Section 5.6(c) shall apply
without limitation to negligent acts or omissions of any Indemnified
Party. Any determination to be made as to whether any Indemnified Party
has met any standard of conduct imposed by law shall be made by legal
counsel reasonably acceptable to such Indemnified Party, Purchaser and
the Surviving Corporation, retained at the Surviving Corporation's
expense. The Surviving Corporation or Purchaser shall pay all expenses,
including counsel fees and expenses, that any Indemnified Party may
incur in enforcing the indemnity and other obligations provided for in
this Section 5.6. Notwithstanding the foregoing, the Purchaser and the
Surviving Corporation shall have no additional indemnification
obligations hereunder with respect to any costs that would otherwise be
covered under the Surviving Corporation's directors' and officers'
liability and fiduciary insurance policies.
(d) In the event the Surviving Corporation or
Purchaser or any of their respective successors or assigns after the
Effective Time (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all
of its properties and assets to any Person, then, and in each such
case, proper provision shall be made so that the successors and assigns
of the Surviving Corporation or Purchaser, as the case may be, shall
assume the obligations set forth in this Section 5.6.
(e) This Section 5.6 is intended to benefit the
Indemnified Parties and the other Persons otherwise covered by this
Section 5.6 and their respective heirs, executors and personal
representatives and shall be binding on the successors and assigns of
Purchaser and the Surviving Corporation. This Section 5.6 shall not
limit or otherwise adversely affect any rights any Indemnified Party or
any other Person otherwise covered by this Section 5.6 may have under
any agreement with the Company or any Subsidiary or the Company's or
any Subsidiary's respective Certificate or Articles of Incorporation or
Bylaws.
(f) In consideration for the indemnification rights
set forth herein, the Company shall request prior to the Effective Time
general releases from all directors and former directors (who were
directors at any time after October 31, 1997) and officers of the
Company and the Subsidiaries releasing the Purchaser, the Company and
the Subsidiaries and their officers, directors, employees and agents of
any claim that they or any of them may have against Purchaser, the
Company or its Subsidiaries (and their officers, directors, employees
and agents), exclusive of employment compensation obligations or
obligations arising under this Section 5.6.
Section 5.7 State Takeover Laws. The Company shall take all necessary
steps to
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exempt the Merger from, or if necessary to challenge the validity or
applicability of Sections 14-2-1131 through 14-2-1133 and 14-2-1110 through
14-2-1113 of the GBCC.
Section 5.8 Rights Agreement. The Company shall take all necessary
action (including, if required, redeeming all of the outstanding Rights (as
defined in the Rights Agreement) or amending or terminating the Rights
Agreement) so that (a) the entering into of this Agreement and consummation of
the Merger do not and will not result in any Person becoming able to exercise
any Rights under the Rights Agreement or enabling or requiring the Rights to be
separated from the shares of Common Stock to which they are attached or to be
triggered or to become exercisable and (b) no Rights are outstanding at the
Effective Time.
Section 5.9 Disclosure Schedule Supplements. From time to time after
the date of this Agreement and prior to the Effective Time, the Company will
supplement or amend the Company Disclosure Schedule with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described in the
Company Disclosure Schedule or which is necessary to correct any information in
a schedule or in any representation and warranty of the Company which has been
rendered inaccurate thereby. For purposes of determining the accuracy of the
representations and warranties of the Company contained in this Agreement in
order to determine the fulfillment of the conditions set forth in Article VI,
the Company Disclosure Schedule shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to exclude
any information contained in any subsequent supplement or amendment thereto.
Section 5.10 Change of Control Agreements. The Company has change of
control agreements with the Persons listed in Section 5.10 of the Company
Disclosure Schedule which provide certain benefits upon (a) consummation of the
Merger and/or (b) a termination of employment following the Effective Time.
Purchaser shall take all appropriate steps necessary to, and will, give
reasonable advance notice prior to the Effective Time of its intention to
continue employment, or not to continue employment, to each such Person. The
Company has previously made written disclosure to Purchaser of the total
estimated amount payable to such Persons for all obligations owed to them under
all contractual and Company Benefit Plan arrangements assuming that the
employment of each such Person was terminated during the year in which the
Effective Time occurred.
Section 5.11 Purchaser's Financing. Purchaser shall use its best
efforts to obtain the Financing on the terms contemplated by the Financing
Commitments (other than the terms set forth in the eighth paragraph of the
Senior Commitment Letter relating to changes in the terms of the financing
described by such Senior Commitment Letter) or alternative financing on terms no
less favorable than those set forth in the Financing Commitments (again, other
than the terms in the eighth paragraph of the Senior Commitment Letter referred
to above) (such financing, "Alternative Financing") and to satisfy the
conditions to such Financing as detailed in the Commitments delivered to the
Company pursuant to Section 4.5 hereof. In addition, Purchaser shall use its
reasonable efforts to enter into definitive agreements with respect to the
Financing or Alternative Financing prior to the mailing of the Proxy Statement,
which obligation shall in no way (i) restrict the conditions that may be imposed
in such definitive agreements with respect to
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the closing of such Financing or Alternative Financing or (ii) alter the
Company's obligation to mail the Proxy Statement to its shareholders at the
earliest practicable time. For the avoidance of doubt, obtaining Alternative
Financing shall not require Purchaser to pay greater financing or other fees
than as set forth in the Financing Commitments or require Purchaser to issue any
equity to any source of such Alternative Financing beyond what is contemplated
by the Financing Commitments.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to Each Party's Obligations to Effect the
Merger.
(a) The respective obligations of each party hereto
to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any and all of
which may be waived in whole or in part to the extent permitted by
applicable law:
(i) Shareholder Approval. The Merger and
this Agreement shall have been approved and adopted by the
affirmative vote of the shareholders of the Company by the
requisite vote.
(ii) Statutes, Court Orders. No statute,
rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
enforced by any court or Governmental Entity of competent
jurisdiction which prohibits, restrains, enjoins or restricts
the consummation of the Merger; and there shall be no order or
injunction of a court of competent jurisdiction in effect
precluding consummation of the Merger.
(iii) Regulatory Approvals. All consents of,
filings and registrations with, and notifications to, all
Governmental Entities required for consummation of the Merger
shall have been obtained or made and shall be in full force
and effect and all waiting periods required by law for
consummation of the Merger shall have expired.
(iv) Consents and Approvals. Each party
hereto shall have obtained any and all consents required for
consummation of the Merger (other than those referred to in
Section 6.1(a)(iii)) or for the preventing of any default
under any contract or permit of such party which, if not
obtained or made, is reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect or a
Purchaser Material Adverse Effect, as applicable.
(v) Purchaser Financing. Purchaser shall
have obtained the Financing on the terms contemplated by the
Financing Commitments or alternative financing on terms no
less favorable than those set forth in the
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Financing Commitments, unless the failure to obtain the
Financing was the result of a failure by Purchaser to perform
any covenant or condition contained therein or herein or the
inaccuracy of any representation or warranty of Purchaser.
(b) The obligation of the Company to effect the
Merger is also subject to the satisfaction (or waiver) at or prior to
the Closing of each of the following additional conditions:
(i) Accuracy of Representations and
Warranties. All representations and warranties made by
Purchaser and Acquisition Sub herein shall be true and correct
in all material respects (except for representations and
warranties qualified by materiality or Purchaser Material
Adverse Effect which shall be correct in all respects) when
made and as of the Effective Time, with the same force and
effect as though such representations and warranties had been
made on and as of the Effective Time, except for changes
permitted or contemplated by this Agreement and except for
representations and warranties that are made as of a specified
date or time, which shall be true and correct in all material
respects (except for representations and warranties qualified
by materiality or Purchaser Material Adverse Effect which
shall be correct in all respects) only as of such specific
date or time.
(ii) Compliance with Covenants. Purchaser
and Acquisition Sub shall have performed in all material
respects all obligations and agreements, and complied in all
material respects with all covenants, contained in this
Agreement to be performed or complied with by them prior to or
as of the Effective Time.
(iii) Officer's Certificate. The Company
shall have received a certificate of Purchaser and Acquisition
Sub, dated as of the Closing Date, signed by an executive
officer of each of Purchaser and Acquisition Sub, to evidence
satisfaction of the conditions set forth in Section 6.1(b)(i)
and (ii).
(c) The respective obligations of Purchaser and
Acquisition Sub to effect the Merger is also subject to the
satisfaction (or waiver) at or prior to the Closing of each of the
following additional conditions:
(i) Accuracy of Representations and
Warranties. All representations and warranties made by the
Company herein shall be true and correct in all material
respects (except for representations and warranties qualified
by materiality or Company Material Adverse Effect which shall
be correct in all respects and except that the representations
and warranties set forth at Section 3.2(a) shall be true and
correct in all respects) when made and as of the Effective
Time, with the same force and effect as though such
representations and
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warranties had been made on and as of the Effective Time,
except for changes permitted or contemplated by this Agreement
and except for representations and warranties that are made as
of a specified date or time, which shall be true and correct
in all material respects (except for representations and
warranties qualified by materiality or Company Material
Adverse Effect which shall be correct in all respects) only as
of such specific date or time.
(ii) Compliance with Covenants. The Company
shall have performed in all material respects all obligations
and agreements, and complied in all material respects with all
covenants, contained in this Agreement to be performed or
complied with by it prior to or as of the Effective Time
(except that the covenant set forth in Section 5.1(a) shall
have been performed in all respects).
(iii) Officer's Certificate. Purchaser shall
have received (A) a certificate of the Company, dated as of
the Closing Date, signed by an executive officer of the
Company, to evidence satisfaction of the conditions set forth
in Section 6.1(c)(i) and (ii) and (B) certified copies of
resolutions duly adopted by the Board and the Company's
shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance
of this Agreement, and the consummation of the Merger.
(iv) Rights Agreement. A Triggering Event
(as defined in the Rights Agreement) shall not have occurred,
and the Rights shall not have become (A) non-redeemable or (B)
exercisable for capital stock of Purchaser upon consummation
of the Merger.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time notwithstanding
any requisite approval and adoption of this Agreement and approval of the Merger
by the shareholders of the Company:
(a) by mutual written consent duly authorized by the
Board of Directors of the Company and the Board of Directors of each of
Acquisition Sub and Purchaser; or
(b) by Purchaser or the Company if (i) any court or
Governmental Entity of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger (including the denial of
any consent of a Governmental Entity required for consummation of the
Merger) and such order, decree, ruling or other action is or shall have
become final and nonappealable or (ii) the Effective Time is not
occurring concurrently therewith on or before June 30, 2000 (the "Drop
Dead Date"); provided, however, that the right to
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terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date; or
(c) by Purchaser if the Board shall have withdrawn,
modified, failed to reaffirm or changed its recommendation or approval
in respect of this Agreement or the Merger, or shall have adopted any
resolution to effect the foregoing, or shall have affirmed, recommended
or authorized entering into any other Acquisition Proposal; or
(d) by Purchaser if there shall have been a breach of
the Company's representation set forth in Section 3.2(a) or covenant
set forth in Section 5.1(c) or a material breach of any of the
Company's other representations, warranties or covenants which breach
cannot be or has not been cured within ten (10) days following receipt
of written notice of such breach; or
(e) by the Company if there shall have been a
material breach of any of Purchaser's representations, warranties or
covenants which breach cannot be or has not been cured within ten (10)
days of the receipt of written notice thereof; or
(f) by the Purchaser or the Company (provided that
the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement) in the event the shareholders of Company fail to vote their
approval and adoption of this Agreement and the approval of the Merger
at the Shareholders' Meeting where such matters were presented to such
shareholders for approval and voted upon; or
(g) by the Company if, a Person or group (other than
Purchaser or any of its affiliates) shall have made a bona fide
Acquisition Proposal that the Board or the Special Committee determines
in good faith that failing to accept or recommend to the Company's
shareholders such Acquisition Proposal could reasonably be determined
to constitute a breach of the fiduciary duties of the Board or the
Special Committee to the Company's shareholders under applicable law
after consultation with (i) a nationally recognized investment banking
firm regarding the financial superiority of the Acquisition Proposal
and (ii) legal counsel; provided that such termination under this
clause (g) shall not be effective until payment of the fee required by
Section 7.3 hereof.
Section 7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 7.2 and Sections 5.3(b), 7.3 and Article
VIII hereof. Nothing contained in this Section 7.2 shall relieve any party from
liability for any breach of this Agreement.
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Section 7.3 Fees and Expenses.
(a) Except as otherwise provided in this Section 7.3,
each of the parties hereto shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with this
Agreement and the Merger, including filing and application fees,
printing fees, and fees and expenses of its own financial or other
consultants, investment bankers, accountants and counsel, except that
the filing fee in connection with any HSR Act filing or any other
required consent or approval shall be shared equally by Purchaser and
Company.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by
Purchaser pursuant to Section 7.1(d),
(ii) if the Merger is not consummated as a
result of the failure of Company to satisfy any of the
conditions set forth in Section 6.1(c), or
(iii) if this Agreement is terminated by
Purchaser pursuant to Section 7.1(c) or the Company pursuant
to Section 7.1(g),
then Company shall promptly pay Purchaser the sum of (A) $1 million,
which amount represents the best estimate by the parties hereto of the
value of the management time, overhead, opportunity costs and other
unallocated costs of Purchaser incurred by or on behalf of Purchaser in
connection with this Agreement and the Merger which cannot be
calculated with certainty, plus (B) all the out-of-pocket costs and
expenses of Purchaser, including costs of counsel, investment bankers,
actuaries and accountants up to but not exceeding an additional $2
million in the aggregate.
(c) If no payment is due under Section 7.3(b) and the
Agreement is terminated or the Merger is not consummated, then the
Company shall promptly pay Purchaser all the out-of-pocket costs and
expenses of Purchaser, including costs of counsel, investment bankers,
actuaries and accountants, up to but not exceeding $2 million in the
aggregate unless
(i) the Agreement is terminated pursuant to
Section 7.1(a) or 7.1(e), or
(ii) the Merger is not consummated because
the conditions set forth at Section 6.1(a)(v) or 6.1(b) are
not satisfied.
(d) If, after the date of this Agreement and within
twelve (12) months following
(i) any termination of this Agreement
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(1) by Purchaser pursuant to Section
7.1(c) or 7.1(d),
(2) by Company pursuant to Section
7.1(g), or
(3) by either Party pursuant to Section
7.1(f) (with respect to approval of the shareholders of
the Company), or
(ii) failure to consummate the Merger by
reason of any failure of Company to satisfy the conditions
enumerated in Section 6.1(c) or Section 6.1(a)(i) (as such
section relates to approval by the shareholders of Company),
any third party shall acquire, merge with, combine with, purchase a
significant amount of assets of (including a significant amount of
assets of, or the stock of, any Subsidiary), or engage in any other
business combination with, or purchase any equity securities involving
an acquisition of 20% or more of the voting stock of, the Company on
terms that are financially superior to those of the Merger, or enter
into any letter of intent or agreement to do any of the foregoing
(collectively, a "Superior Business Combination"), such third party
that is a party to the Superior Business Combination shall pay to
Purchaser, (A) upon execution of such letter of intent or agreement
relating to such Superior Business Combination, the sum of (i) $1
million, which amount represents the best estimate by the parties
hereto of the value of the management time, overhead, opportunity costs
and other unallocated costs of Purchaser incurred by or on behalf of
Purchaser in connection with this Agreement and the Merger which cannot
be calculated with certainty, plus (ii) all the out-of-pocket costs and
expenses of Purchaser, including costs of counsel, investment bankers,
actuaries and accountants up to but not exceeding an additional $2
million in the aggregate, and (B) upon the consummation of any Superior
Business Combination that occurs within the later of 24 months from the
date hereof or 12 months from the date of such letter of intent or
agreement, an amount in cash equal to the product of $5 million and the
percentage of the Company assets or equity securities acquired in the
Superior Business Combination, which sum represents additional
compensation for Purchaser's loss (including expenses) as a result of
this Agreement and the Merger not being consummated. The amounts owed
under the preceding clauses (A) and (B) shall be reduced by any amounts
previously paid to Purchaser pursuant to subsection (b), (c) or (d) of
this Section 7.3. In the event such third party shall refuse to pay
such amounts within ten days of demand therefor by Purchaser, the
amounts shall be an obligation of Company and shall be paid by Company
promptly upon notice to Company by Purchaser.
(e) Nothing contained in this Section 7.3 shall
constitute or shall be deemed to constitute liquidated damages for the
willful breach by a party hereto of the terms of this Agreement or
otherwise limit the rights of the nonbreaching party.
Section 7.4 Amendment. Subject to applicable law, this Agreement may be
amended by action taken by the Company and Purchaser at any time before or after
approval of the Merger by the shareholders of the Company but, after any such
approval, no amendment shall be made
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which requires the approval of such shareholders under applicable law without
such approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties hereto.
Section 7.5 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document,
certificate or writing delivered pursuant hereto or (c) waive compliance by the
other party with any of the agreements, covenants or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 8.2 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof (including, without limitation, that certain
Confidentiality Agreement, as amended, between the Company and an affiliate of
Purchaser) and (b) shall not be assigned by operation of law or otherwise.
Section 8.3 Validity. If any provision of this Agreement, or the
application thereof to any Person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other Persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 8.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (including by facsimile with
written confirmation thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business hours by hand, by Federal Express,
United Parcel Service or other nationally recognized overnight commercial
delivery service, or by facsimile notice, confirmation of receipt received,
addressed as follows, or to such other address as may be hereafter notified by
the respective parties hereto:
(a) If to Purchaser or Acquisition Sub:
CBP Holdings, Inc.
Attention: Bart A. McLean, President
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Facsimile No.: (404) 816-3258
With a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309-3424
Attention: Teri Lynn McMahon, Esq.
Facsimile No.: (404) 881-7777
(b) If to the Company:
Cameron Ashley Building Products, Inc.
11651 Plano Road
Dallas, Texas 75243
Attention: Ronald R. Ross, Chairman and CEO
Facsimile No.: (214) 860-5148
With a copy to:
The Special Committee
C/o Lawrence P. Klamon
2665 Dellwood Drive, N.W.
Atlanta, Georgia 30305-3519
Facsimile No.: (404) 885-1840
With a copy to:
Locke Liddell & Sapp LLP
2200 Ross Avenue
Suite 2200
Dallas, TX 75201
Attention: Guy Kerr, Esq.
Facsimile No.: (214) 740-8800
Section 8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, without regard to
the principles of conflicts of law thereof. The parties hereto hereby agree and
consent to be subject to the exclusive jurisdiction of the United States
District Court for the District of Georgia in any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the Merger. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by law, (a) any objection
that it may now or hereafter have to laying venue of any suit, action or
proceeding brought in such court and (b) any claim that any suit, action or
proceeding brought in such court has been brought in an inconvenient forum.
-51-
<PAGE> 52
Section 8.6 Descriptive Headings. The descriptive headings 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.
Section 8.7 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Section 5.6 and this Article VIII,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other Person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 8.8 Signatures. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement. Copies of signatures
transmitted via facsimile shall constitute original signatures for all purposes
of this Agreement.
Section 8.9 Definition. For purposes of this Agreement, the term
"knowledge" shall mean with respect to the Company the actual knowledge of the
executive officers of the Company.
-52-
<PAGE> 53
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
CAMERON ASHLEY BUILDING PRODUCTS,
INC.
By: /S/ Ronald R. Ross
------------------------
Name: Ronald R. Ross
----------------------
Title: Chairman & CEO
---------------------
CBP HOLDINGS, INC.
By: /S/ Bart A. McLean
------------------------
Name: Bart A. McLean
----------------------
Title: President
---------------------
CBP ACQUISITION CORP.
By: /S/ Bart A. McLean
------------------------
Name: Bart A. McLean
----------------------
Title: President
---------------------
-53-
<PAGE> 1
EXHIBIT B
Letter Agreement Dated Jan. 17, 2000
January 17, 2000
CGW Southeast Partners IV, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, GA 30305
Attention: Mr. Bart McLean
Gentlemen:
We have been discussing a transaction in which CBP Holdings,
Inc., a newly-formed entity (the "Issuer") to be initially capitalized by
Citicorp Venture Capital, Ltd. (together with one or more of its affiliates or
associates, "CVC") and CGW Southeast Partners IV, L.P. ("CGW" or "you"), will
indirectly acquire (the "Acquisition") 100% of the outstanding stock of Cameron
Ashley Building Products, Inc. ("Cameron Ashley") from the holders thereof. In
consideration for our mutual commitment to invest $25.5 million each in the
Issuer on the terms and conditions set forth in this letter agreement and to
proceed further to consummate the Acquisition, we hereby agree as follows:
1. EXCLUSIVITY. In consideration of our mutual agreement to
consummate the Acquisition on terms substantially consistent with those set
forth in the term sheet attached hereto as Exhibit A, (i) you hereby agree that,
without the prior written consent of CVC, neither you nor any of your affiliates
will be involved in the consummation of the Acquisition, or enter into any
transaction related to the Acquisition (including without limitation any debt or
equity financing thereof), except in conjunction with CVC in a manner
substantially consistent with the terms set forth in the attached Exhibit A, and
(ii) CVC hereby agrees that, without your prior written consent, it will not be
involved in the consummation of the Acquisition, or enter into any transaction
related to the Acquisition (including without limitation any debt or equity
financing thereof), except in conjunction with you in a manner substantially
consistent with the terms set forth in the attached Exhibit A. Notwithstanding
the foregoing, if CGW has complied with the terms and conditions of this letter
agreement and (x) CVC elects not to fulfill its obligation hereunder because a
condition precedent to such obligation contained herein has not been satisfied,
or (y) CVC breaches the terms and conditions of this letter agreement, CGW may
provide the entire equity financing necessary to consummate the Acquisition or
<PAGE> 2
introduce another provider of equity financing to the Acquisition in order to
consummate the Acquisition.
2. CONDITIONS. The obligation of each of CVC and CGW hereunder
would be subject to the following conditions: (i) execution of mutually
acceptable equity documents and related documents, including, but not limited
to, a Stockholders Agreement, Registration Rights Agreement, and Securities
Purchase Agreements; (ii) receipt of any governmental or other regulatory
consents, approvals or licenses required to consummate the Acquisition; and
(iii) receipt of the cash proceeds of financing necessary to consummate the
Acquisition and provide for the ongoing working capital needs of Cameron Ashley
and satisfaction of all other closing conditions contained in the Agreement and
Plan of Merger, dated as of January 17, 2000, by and among the Issuer, CBP
Acquisition Corp., and certain other parties thereto (the "Merger Agreement").
3. ADDITIONAL AGREEMENTS. In addition to the other agreements
set forth herein, each of CVC and CGW hereby agree that (i) CGW shall cooperate
with CVC with respect to providing any information needed by CVC to prepare any
reports or documents required to be filed by either party with the Small
Business Administration shall be mutually consistent in form and substance, and
(ii) neither party shall, without the consent of the other party hereto, (A)
amend, or cause to be amended, the terms of the Merger Agreement, (B) enter into
any other agreement with respect to the Acquisition, including, without
limitation, the debt and equity financing arrangements of the Acquisition, (C)
waive any condition contained in the Merger Agreement or in any other document
related to the Merger Agreement or the Acquisition, (D) introduce any provider
of debt or equity financing to the Acquisition, other than (w) the parties
hereto, (x) Fleet Capital Corporation and Fleet Robertson Stephens, Inc., (y)
J.H. Whitney Mezzanine Fund, L.P. and its syndicate members, and (z) as provided
pursuant to the terms and conditions of this letter agreement, or (E) issue any
press release, make any public announcement, or file any document regarding the
Acquisition with any governmental authority or regulatory body.
4. COMMERCIALLY REASONABLE EFFORTS. Each of CVC and CGW hereby
agrees that, until such time as this letter agreement has terminated in
accordance with the terms and conditions of paragraph 6 hereof, it will use
commercially reasonable efforts and negotiate in good faith in order to
effectuate the Acquisition on terms substantially consistent with those set
forth in the attached Exhibit A.
5. CONFIDENTIALITY. Each of CVC and CGW agrees that neither it
not any of their affiliates, directors, officers, agents, representatives or
other employees shall make any public announcement with respect to this letter
agreement or the transactions contemplated hereby, or disclose the terms or
existence of this letter agreement to any third party (other than to their
<PAGE> 3
respective advisors, representatives and agents, on a need-to-know basis, for
purposes of evaluating and negotiating the transactions contemplated by this
agreement) without the prior written consent of the other party.
6. TERMINATION. This letter agreement will automatically
terminate and be of no further force and effect upon the earlier of: (i) mutual
agreement of CVC and CGW; (ii) consummation of the Acquisition; and (iii) twelve
(12) months after the acceptance of this letter agreement by CGW; provided, that
paragraphs 5 and 7 hereof shall survive any termination of this letter
agreement. Notwithstanding anything in the previous sentence, the termination of
this letter agreement shall not affect any rights any party has with respect to
the breach of this letter agreement by another party hereto prior to such
termination.
7. FEES AND EXPENSES. Costs and expenses incurred by each
party in connection with this letter and the Acquisition shall be borne by the
Issuer or Cameron Ashley pursuant to the terms of the Merger Agreement;
provided, that any third party out-of-pocket expenses incurred by CVC or CGW
prior to the consummation of the Acquisition shall be borne one-half by each
party to the extent that such expenses are not recoverable from the Issuer or
Cameron Ashley. CVC and CGW shall share equally any management fees and
investment banking fees payable in respect of the Acquisition; provided, that
CVC shall be entitled to direct the account and payees to which its portion of
such fees are to be paid. CVC shall be entitled to receive 50% of any payments
received by the Purchaser, net of out-of-pocket expenses incurred by the
Purchaser, pursuant to the terms and conditions of the Merger Agreement.
8. GOVERNING LAW; MISCELLANEOUS. This letter agreement shall
be governed by and construed in accordance with internal substantive laws of the
State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law or choice of law. This letter
agreement may be executed in counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one agreement. The
headings of the various sections of this letter agreement have been inserted for
reference only and shall not be deemed to be a part of this letter agreement.
* * * *
<PAGE> 4
CGW Southeast Partners IV, L.P.
January 17, 2000
Page 4
If you are in agreement with the terms set forth above and
desire to proceed with the transactions contemplated hereby on that basis,
please sign this letter agreement in the space provided below and return an
executed copy to the attention of David F. Thomas or Michael Bradley at the
above address no later than 5:00 p.m., New York time, on January 17, 2000.
Yours sincerely,
CITICORP VENTURE CAPITAL, LTD.
By: /s/ Michael Bradley
------------------------
Name: Michael Bradley
Title: Vice President
Accepted and Agreed to as of the date first above written.
CGW SOUTHEAST PARTNERS IV, L.P.
By: CGW Southeast IV, LLC
By: CGW, Inc., its Manager
By: /s/ Bart McLean
-----------------------
Name: Bart McLean
Title: Vice President
<PAGE> 5
EXHIBIT A
ACQUISITION OF CAMERON ASHLEY BUILDING PRODUCTS, INC.
SUMMARY OF CERTAIN TERMS OF INVESTMENT
INVESTORS: Citicorp Venture Capital, Ltd. ("CVC") and CGW
Southeast Partners IV, L.P. ("CGW").
ISSUER: CBP Holdings, Inc., a Georgia corporation.
INVESTMENT: Each of CVC and CGW shall invest $25.5 million in
the Issuer in exchange for common and/or
preferred equity securities of the Issuer. The
terms of the Issuer's equity securities shall be
mutually agreeable to each of CVC and CGW.
MANAGEMENT INVESTMENT: Members of management of Cameron Ashley Building
Products, Inc. ("Cameron Ashley") will have the
opportunity to invest an aggregate amount of at
least $4.0 million in the Issuer in exchange for
common and/or preferred equity securities of the
Issuer. A percentage of the Issuer's total
outstanding common equity securities will be
reserved for issuance to members of Cameron
Ashley management in the form of restricted stock
options (the "Stock Option Plan"). The ownership
interest of each of CVC and CGW in the Issuer
shall be diluted on a PRO RATA basis as a result
of any issuances of equity securities by the
Issuer to members of Cameron Ashley management,
whether pursuant to the Stock Option Plan or
otherwise.
SUBORDINATED LENDER WARRANTS: In consideration for providing subordinated
financing, J.H. Whitney Mezzanine Fund, L.P.
and/or one or more of its affiliates or
participants will receive warrants exercisable
for up to 4.0% of the Issuer's
<PAGE> 6
CGW Southeast Partners IV, L.P.
January 17, 2000
Page 6
fully-diluted common equity securities (the
"Subordinated Warrants"). The issuance of such
Subordinated Warrants shall dilute the ownership
interest of each of CVC and CGW in the Issuer on
a PRO RATA basis.
BOARD OF DIRECTORS: To be composed of seven individuals as follows:
two (2) shall be designated by CGW; two (2) shall
be designated by CVC; two (2) shall be senior
members of management of Cameron Ashley Building
Products, Inc. ("Cameron Ashley"); and one (1)
shall be an outside director to be agreed upon by
CGW and CVC.
The Issuer shall not undertake certain specified
actions without the consent of each of CGW and
CVC.
EQUITY RIGHTS: Holders of the Issuer's equity securities
shall be entitled to mutually agreed upon
tag-along rights and limited preemptive rights
and shall be subject to drag along rights.
REGISTRATION RIGHTS: Customary for transactions of this nature.
DOCUMENTATION: The funding of the Investment by each of CVC and
CGW shall be contingent upon the execution of
mutually acceptable transaction documents,
including, but not limited to, a Stockholders
Agreement, a Registration Rights Agreement, and
Securities Purchase Agreements.
<PAGE> 1
EXHIBIT C
December 6, 1999
CGW Southeast Partners IV, LP
12 Piedmont Center, Suite 210
Atlanta, Georgia 30305
Attention: Bart A. McLean
Ladies and Gentlemen:
We are pleased to confirm the commitment of Fleet Capital Corporation (FCC),
subject to the terms and conditions in this letter and in the Outline referred
to below, to provide $315 million senior, secured credit facilities (the
FINANCING) to a newly formed entity (CAB) controlled by CGW Southeast Partners
IV, LP and its affiliates (CGW), in connection with the acquisition by CAB of
the capital stock of Cameron Ashley Building Products, Inc. (CAMERON, and such
acquisition, the ACQUISITION). The borrower(s) under the definitive credit
documents governing the Financing (the BORROWER) will be the surviving
corporation of the merger of CAB and Cameron (the MERGER).
The Borrower will secure its obligations in respect of the Financing with a
pledge of substantially all of its tangible and intangible assets and property,
including inventory, accounts receivable, equipment, real estate, capital stock
of subsidiary companies and intellectual property. All of the Borrower's
significant domestic subsidiaries will be co-borrowers or will guaranty the
Financing, at FCC's election, and will secure their obligations in respect of
the Financing (whether direct or pursuant to their guaranties) with a pledge of
substantially all of their tangible and intangible property.
FCC will act as agent (in such capacity, the AGENT) for itself and any other
lending institutions which may become party to the Financing (the LENDERS) and
BancBoston Robertson Stephens Inc. (BRSI) will act as the exclusive syndication
agent and arranger for the Lenders (the ARRANGER) with respect to the Financing.
We understand that the proceeds of the Financing will be used to pay, in part,
the consideration to be paid to existing shareholders of Cameron in connection
with the Acquisition and Merger, to refinance existing debt of Cameron, to pay
expenses of the Acquisition and Merger, to finance "Permitted Acquisitions" as
described in the Outline and to fund the continuing working capital needs of the
Borrower and its subsidiaries, including capital expenditures. The balance of
the funding required to consummate the Acquisition will be provided by the
issuance by the Borrower of $55 million original principal amount of unsecured
subordinated debt, on terms and
FLEET CAPITAL CORPORATION CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 2
CGW Southeast Partners IV, LP
Commitment Letter
December 6, 1999
conditions acceptable to FCC in its reasonable judgment (the SUB DEBT) and an
equity contribution by CGW and other investors of $55 million (the EQUITY
INVESTMENT).
FCC will provide the full amount of the Financing, but intends to syndicate the
Financing either before or after closing. Based on our discussions and on the
financial statements, projections and other information and documents previously
furnished to us, we are enclosing herewith an outline of terms and conditions
(the OUTLINE) which sets forth the principal terms on which FCC would be willing
to provide the proposed Financing (this letter and the Outline are collectively
referred to as the COMMITMENT LETTER) and BRSI would be willing to act as the
Arranger.
Our willingness to proceed with the proposed Financing is conditioned on (1)
there being no material misstatements in or omissions from the materials which
have previously been furnished in writing to us for our review, when taken as a
whole and in light of the circumstances in which such materials are presented,
(2) there being in our reasonable judgment no material adverse change in the
assets, business or financial condition of Cameron and its subsidiaries, taken
as a whole, or in the businesses and assets to be acquired in the Acquisition or
in the ability of the Borrower, any co-borrower or any subsidiary guarantor, to
perform its respective obligations described in the Outline, and (3)
satisfactory completion of our due diligence investigation with respect to
Cameron, including our completion of a Commercial Finance Exam, our receipt of
satisfactory environmental assessments with respect to real property owned or
operated by Cameron and its subsidiaries, satisfactory review of all financial
information (including substantiation of FY1999 pro forma adjusted EBITDA of $55
million and review of tax matters), our receipt of satisfactory appraisals of
all fixed assets, real estate and satisfactory review of pending and threatened
litigation, and (4) satisfactory completion of other items more detailed in the
attached Outline. In addition, the proposed Financing is subject to the
condition that prior to closing of the Financing there are no material adverse
changes in governmental regulation or policy affecting us, Cameron or any of
Cameron's subsidiaries and no material changes or disruptions in the
syndication, financial or capital markets that could reasonably be expected to
materially impair the syndication of the Financing.
By your signature below, you agree to assist and cooperate with the Arranger in
its syndication efforts, including, but not limited to, promptly preparing and
providing materials and information reasonably deemed necessary by the Arranger
to complete successfully and otherwise facilitate the syndication of the
facilities described herein. In the event that such syndication cannot be
achieved in a manner reasonably satisfactory to FCC and BRSI under the structure
described in the Outline, you agree to cooperate with FCC and BRSI in developing
a mutually acceptable alternative structure that will permit a satisfactory
syndication of such credit facilities. Without limiting the foregoing, you
hereby agree: (a) that the Arranger shall have the exclusive right to syndicate
the Financing and manage all aspects of the syndication (including, without
limitation, in consultation with and subject to the reasonable approval of CGW,
decisions as to the selection
FLEET CAPITAL CORPORATION CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
2
<PAGE> 3
CGW Southeast Partners IV, LP
Commitment Letter
December 6, 1999
of institutions to be approached and when they will be approached, when their
commitments will be accepted, which institutions will participate, the
allocations of the commitments among the syndicate lenders and any titles to be
given to any Lender participating in the Financing) and that you will assist the
Arranger and use reasonable efforts to cause Cameron and its management to
assist the Arranger in contacting and soliciting potential co-lenders and will
provide to the Arranger, as its reasonable request, financial and organizational
information as well as financial projections needed for syndication purposes;
(b) that the Arranger shall be expressly permitted to distribute any and all
documents and information relating to the transactions contemplated hereby and
received from you or any other source to any potential lender, participant or
assignee, on a confidential basis and subject to reasonable confidentiality
agreements requested by you; (c) to make available CAB and CGW personnel, and to
the extent agreed to by Cameron, Cameron management personnel, responsible for
the Financing or operations of the Borrower or any subsidiary for meetings with
potential syndicate members upon reasonable notification and at reasonable times
to be mutually agreed; (d) to permit the Arranger to publish information in
respect of the Financing (including the Agent's and the Arranger's roles in the
structuring and financing thereof), subject to your reasonable prior approval of
the form and content thereof; and (e) that prior to or after the execution of
the definitive documentation for the Financing, FCC may syndicate all or any
portion of its commitment hereunder to one or more financial institutions after
consultation with and subject to the reasonable approval of CAB and the
Arranger, and further, that upon acceptance by FCC of a written commitment of
any entity to provide a portion of the Financing, FCC shall be released from a
portion of its commitment hereunder in an aggregate amount equal to the
commitment of such entity. In particular, and without limitation of the
foregoing, you , FCC and the Arranger agree to negotiate in good faith regarding
any changes in the definitive loan documents that may be requested in good faith
by prospective Lenders.
Although the Outline sets forth the principal terms of the Financing, you should
understand that FCC, the Agent and the Arranger reserve the right, after
consultation with the Borrower, to change the pricing, structure, terms or
amount of any portion of the Financing if FCC and the Arranger reasonably
determine that such changes are advisable in order to ensure a successful
syndication or an optimal credit structure for the Financing, so long as the
aggregate amount of the Financing shall not be reduced. Moreover, the Outline
does not purport to include all of the customary representations, warranties,
defaults, definitions and other terms which will be contained in the definitive
documents for the Financing, all of which must be reasonably satisfactory in
form and substance to us and our counsel and to you and your counsel prior to
proceeding with the Financing.
By your signature below, you agree to pay all reasonable out-of-pocket costs and
expenses incurred by FCC, the Agent and the Arranger and their respective agents
in connection with this Commitment Letter, the transactions contemplated hereby
and FCC's, the Agent's and the
FLEET CAPITAL CORPORATION CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
3
<PAGE> 4
CGW Southeast Partners IV, LP
Commitment Letter
December 6, 1999
Arranger's ongoing due diligence in connection therewith (the EXPENSES)
(including, without limitation, reasonable attorneys' fees and expenses (for a
single special counsel for the Agent, as well as local counsel in each relevant
jurisdiction to address real estate and collateral matters and an agreed upon
amount for review by any documentation agent appointed in the Financing))
whether or not such transactions are consummated.
Further, in consideration of the commitment contained herein, you agree to pay
the Agent the fees described in the letter enclosed herewith (the FEE LETTER) on
the dates and in the amounts provided in the Fee Letter.
By your signature below, you further agree to indemnify and hold harmless FCC,
BRSI, the Agent, the Arranger and each of their respective officers, directors,
employees, affiliates, agents and controlling persons from and against any and
all losses, claims, damages and liabilities to which any such person may become
subject arising out of, or in connection with, the Acquisition, this Commitment
Letter, the transactions contemplated hereby or any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
of such indemnified persons is a party thereto, and to reimburse each of such
indemnified persons, from time to time upon their demand, for any reasonable
legal or other expenses incurred in connection with investigating or defending
any of the foregoing, whether or not the transactions contemplated hereby are
consummated, PROVIDED that the foregoing indemnity will not, as to any
indemnified person, apply to losses, claims, damages, liabilities or related
expenses to the extent that they arise from the bad faith, willful misconduct or
gross negligence of such indemnified person.
You agree that this Commitment Letter is for your confidential use only and that
it will not be disclosed by you to any person (including any lender bidding for
the financing contemplated by this Commitment Letter) other than to the Board of
Directors of Cameron and its advisors, to your principals, to your employees,
officers, directors, accountants, attorneys, and other advisors, and to any
other person consented to by FCC, the Agent or the Arranger, in each case, only
in connection with the transactions contemplated hereby and on a confidential
basis.
Each of FCC, the Agent and the Arranger agrees to keep any information delivered
or made available by you to it confidential and not to disclose such information
other than to their respective employees, officers, attorneys and other advisors
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Financing or rendering advice in connection therewith,
PROVIDED that nothing herein shall prevent FCC, the Agent or the Arranger from
disclosing such information (a) to potential participants in and assignees of
the Financing subject to reasonable confidentiality agreements, (b) upon the
order of any court or administrative agency, (c) upon the request or demand of
any administrative or regulatory agency or authority, (d) to the extent that
such information has been publicly disclosed other than as a result of a
disclosure by FCC, the Agent or the Arranger or (e) otherwise as required by
law.
FLEET CAPITAL CORPORATION CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
4
<PAGE> 5
CGW Southeast Partners IV, LP
Commitment Letter
December 6, 1999
This Commitment Letter is delivered with the specific understanding that, except
as specifically set forth in the preceding paragraphs, it is not intended to
give rise to any legal liability on the part of either you or FCC or BRSI and
that the commitment set forth herein shall be considered withdrawn if for any
reason (1) you fail to return to FCC's office in Atlanta, Georgia by 5:00 p.m.
(Eastern time) on December 7, 1999 (the EXPIRATION DATE) the enclosed copy of
this Commitment Letter, the related Fee Letter signed by you, and a deposit in
the amount of $150,000 to be applied to the payment of our out-of-pocket
expenses for which you agree herein to reimburse us, or (2) after such
acceptance, definitive documentation evidencing the Financing, acceptable to
FCC, the Agent and the Arranger, has not been executed and delivered by the
Borrower on or before March 1, 2000. (If this commitment is terminated, after
acceptance, for any reason other than by the closing and initial funding of the
Financing, any unapplied balance of such deposit will be returned to you.)
If the foregoing is in accordance with your understanding, please accept this
Commitment Letter by signing the enclosed duplicate in the space indicated and
returning it to us, together with a signed copy of the Fee Letter and the
expense deposit referred to above, on or prior to Expiration Date.
Very truly yours,
FLEET CAPITAL CORPORATION BANCBOSTON ROBERTSON STEPHENS INC.
By /S/ David W. Bell By /S/ Harold Blatt for Thad D. Johnson
-------------------- -------------------------------------
David W. Bell Thad D. Johnson
Senior Vice President Director
Agreed and accepted this _7th_ day
of December 1999
CGW SOUTHEAST PARTNERS IV, LP
By: /S/ Bart A. McLean
- ----------------------
Title: Partner
FLEET CAPITAL CORPORATION CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
5
<PAGE> 6
CAMERON ASHLEY BUILDING PRODUCTS, INC.
Outline of Terms and Conditions
$315,000,000 SENIOR SECURED CREDIT FACILITIES
DECEMBER 6, 1999
The proposed terms and conditions are provided for discussion purposes only
and do not constitute an offer, agreement or commitment to lend. The actual
terms and conditions upon which Fleet Capital Corporation ("Fleet") might
extend credit to the Borrowers, or BancBoston Robertson Stephens Inc.
("BRSI") might agree to syndicate the facilities, are subject to satisfactory
completion of due diligence, credit approval, satisfactory review and
execution of documentation and such other terms and conditions as may be
determined by Fleet, BRSI and their counsel.
BORROWERS: The survivor of the merger of a newly created entity ("Newco")
formed to acquire the outstanding capital stock of Cameron
Ashley Building Products, Inc. (such survivor, the "Company"
or "Cameron") together with all of the Company's material
domestic subsidiaries (together with the Company, the
"Borrowers"). At the Agent's option, such subsidiaries may be
guarantors, rather than co-borrowers (in such case, the
"Guarantors"), provided that no guaranty will be required of
any non-US subsidiary if such guaranty would result in adverse
tax consequences to the Company.
FACILITIES: Up to $315,000,000 aggregate senior secured credit facilities
consisting of the following:
(i) $225,000,000 Revolving Credit Facility (the
"Revolver"), including a $15,000,000 sublimit for
Standby Letters of Credit and a $10,000,000 Swingline
Facility;
(ii) Up to $65,000,000 Term Loan Loan (the "Term
Loan").
(iii) $25,000,000 Capex Facility (the "Capex
Facility").
The Revolver, Term Loan, and Capex Facility are
referred to herein as the "Credit Facilities" or
"Facilities."
Fleet Capital Corporation. 6 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 7
Through the Bank of Nova Scotia ("Scotiabank"),
Cameron Ashley Canada, Ltd. will be provided with a
Canadian Revolving Credit Facility in an amount up to
[C$to be determined] (the "Canadian Revolver"). In
order to induce Scotiabank to provide the Canadian
Revolver, the Agent, on behalf of the Lenders, will
provide a Standby Letter of Credit for the benefit of
Scotiabank.
PURPOSE:
Amounts drawn under the Revolver, Canadian Revolver and Term Loan on
the Closing Date will be used, in conjunction with the subordinated debt
proceeds and equity contribution, both described herein, to finance the purchase
of the outstanding capital stock of Cameron Ashley Building Products, Inc., to
refinance existing indebtedness, and to pay transaction expenses. Thereafter,
the Revolver and Capex Facility will be available to fund on-going working
capital and general corporate needs, including capital expenditures and
Permitted Acquisitions.
GUARANTORS:
Cameron and all domestic material operating subsidiaries, which are
Borrowers, shall provide unlimited and unconditional guarantees of all
obligations under the Facilities.
ADMINISTRATIVE AGENT:
Fleet Capital Corporation ("Fleet" or the "Agent").
ARRANGER:
BancBoston Robertson Stephens Inc. ("BRSI") will underwrite the full
amount of Facilities as Arranger and will syndicate the Facilities to a group of
lenders acceptable to the Borrowers and the Agent.
CLOSING DATE:
Targeted to occur on or before March 1, 2000 ("Closing").
FINAL MATURITY:
March 1, 2004 or five (5) years from closing.
SECURITY:
First priority security interest in and lien on substantially all
tangible and intangible assets (including all intellectual property and rights
to payment(s) and related intangibles) of the domestic Borrowers and Guarantors.
Cameron will pledge all of the capital stock of its subsidiaries (other than
non-US subsidiaries of which 65% of the capital stock will be pledged).
AVAILABILITY:
REVOLVER - Amounts under the Revolver may be drawn, repaid and
reborrowed, subject to availability under the Borrowing Base, which shall be
equal to the sum of: (i) 85% of combined eligible accounts receivable; plus (ii)
60% of combined eligible inventory. Amounts repaid under the Revolver may be
reborrowed. The Borrowing Base, with accompanying accounts receivable agings and
inventory designations, will be reported monthly, or at more frequent intervals
as determined by the Agent in its reasonable discretion. The Agent, in its
reasonable credit judgment, reserves the right to conduct periodic commercial
finance exams and modify eligibility standards and establish and modify reserves
against Borrowing Base availability. Availability at closing will be at least
[to be determined].
CANADIAN REVOLVER - The Canadian Revolver will also be subject to a
borrowing base equal to
Fleet Capital Corporation. 7 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 8
the sum of : (i) 85% of combined eligible accounts receivable; plus (ii) 60% of
combined eligible inventory. Advances under the Canadian Revolver may be made in
Canadian Dollars at the Borrower's option.
Final availability and eligibility criteria will be based on the
results of a commercial finance exam to be performed by Fleet, or its designee,
including a Take Down exam to be completed pre-Closing. Fleet may make
adjustments to advance rates, eligibility requirements, and reserves, etc.
post-Closing, in its sole and reasonable discretion.
TERM LOAN - Up to $65,000,000 of the Term Loan shall be drawn in full
at closing. The Term Loan amount will be limited to i) 80% of the Orderly
Liquidation Value of Equipment plus ii) 60% of the Fair Market Value of Real
Estate plus iii) the lesser of $30,000,000 or such amount mutually agreed upon
that may be comfortably amortized in years one through three.
CAPEX FACILITY - The Capex Facility will be available for two years from
closing, to finance the purchases of equipment. Advances will be based on 80% of
the "hard cost" of newly purchased equipment and 80% of the Orderly Liquidation
Value of used equipment purchased.
AMORTIZATION: REVOLVER AND CANADIAN REVOLVER - No amortization, bullet at
maturity.
TERM LOAN - Quarterly payments in arrears based on
the following annual amortization schedule. The first
payment date will be due 90 days from closing. The
balloon payment will be due on the fifth anniversary
of closing.
<TABLE>
<CAPTION>
($ in millions)
Year Total
---- -----
<S> <C>
1 $ 7,500
2 $10,000
3 $12,500
4 $12,500
5 $12,500
Balloon $10,000
Total $65,000
</TABLE>
If the Term Loan is not fully drawn, amortization
amounts will be based upon the pro-rata percentage of
the drawn Term Loan to the $65,000,000 Term Loan
maximum.
CAPEX FACILITY - Advances will be accumulated on a
quarterly basis (minimum $2,500M) and amortized over
a 5 year straight line schedule with a final payment
due on the same date as the final installment of the
Term Loan.
Fleet Capital Corporation. 8 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 9
SWINGLINE FACILITY: Up to $10,000,000 of the Revolver will be available
for swingline advances ("Swingline Loans") to be made
available to the Borrowers by Fleet. Swingline Loans
will constitute usage under the Revolver (except for
Unused fee purposes) and will reduce availability of
the Revolver dollar for dollar. Swingline Loans made
by Fleet will be settled with the Lenders on a weekly
basis.
INTEREST RATE: Outstanding amounts under the Facilities shall accrue
interest at the Borrowers' option at the Alternate
Base Rate or the Eurodollar Rate, plus the Applicable
Margin. The term "Alternate Base Rate" would mean the
greater of the prime, base or equivalent rate of
interest announced or published from time to time
hereafter by Fleet National Bank. The Applicable
Margin for each of the Facilities will be determined
as follows:
<TABLE>
<CAPTION>
LEVEL LEVERAGE RATIO REVOLVER Unused Fee Term Loan and Capex
Facility
(Funded Debt/EBITDA) Euro + Base+ Euro + Base +
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I > 5.00x 3.00% 0.75% 0.500% 3.50% 1.25%
II 4.50x (less than or equal to) x (less than or equal to) 5.00x 2.75% 0.50% 0.375% 3.25% 1.00%
III 3.50x (less than or equal to) x < 4.50x 2.50% 0.25% 0.375% 3.00% 0.75%
IV 3.00x (less than or equal to) x < 3.50x 2.25% 0.00% 0.250% 2.75% 0.50%
V (less than or equal to) 3.00x 2.00% 0.00% 0.250% 2.50% 0.25%
</TABLE>
For purposes of calculating the Applicable Margin, the Leverage Ratio
is defined as the ratio of Total Funded Debt divided
by EBITDA, calculated on a rolling four-quarter
basis. Total Funded Debt and EBITDA shall be
determined on a consolidated basis in accordance with
GAAP (with pro forma adjustments for future Permitted
Acquisitions and related permitted debt).
Minimum pricing will be set at Level II until the Agent's receipt of
the Borrowers' October 31, 2000 audited financial
statement and compliance certificate. Overdue
principal,
Fleet Capital Corporation. 9 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 10
interest and fees will bear interest at 2% over the
rate otherwise applicable thereto.
The interest rate on the Canadian Revolver for use by
Cameron Ashley Canada, Ltd. will be, at Borrower's
option, Scotiabank's (1) Canadian Prime Rate or (2)
Scotiabank's Canadian Bankers Acceptance Rate (CBA)
plus 50 basis points (subject to a handling fee of
C$200) for the applicable time period chosen. If the
CBA option is chosen borrowings may be made for the
available time periods of 1, 2, 3 or 6 months.
INTEREST PERIODS: Eurodollar rates may be selected for interest periods
of 1, 2, 3 or 6 months, as available.
UNUSED FEE: An Unused Fee will be payable quarterly in arrears
based on the average daily unused commitment
(excluding outstanding Letters of Credit but not
excluding borrowings under the Swingline Facility),
under the Revolver as set forth in the table above.
LETTER OF CREDIT FEES: Payable pro rata to the Lenders at the annual rate
equal to the Applicable Margin on Eurodollar Rate
Revolving Credit Loans and based on the maximum
amount available to be drawn under each Standby
Letter of Credit; standard fees and charges on all
documentary/commercial letters of credit. In
addition, the Borrowers will pay to the Issuing Bank
a fronting fee equal to 0.125% per annum on the
maximum amount of each Standby Letter of Credit. The
letter of credit fee and other charges associated
with the Standby Letter of Credit issued in favor of
Scotiabank must be paid by Cameron.
INTEREST PAYMENTS: Interest on Base Rate loans will be due and payable
monthly in arrears. Interest on Eurodollar Rate loans
will be due and payable at the earliest of the end of
each applicable interest period or quarterly. The
effective date of any change in the Applicable Margin
due to a change in the Borrowers' Leverage Ratio will
be the third business day following the receipt by
the Agent and the Lenders of the Borrowers' quarterly
financial information.
CASH MANAGEMENT: Fleet National Bank will be the primary depository
and disbursement bank for the Borrower for its
domestic accounts. In Canada, Scotiabank will be the
primary depository and disbursement bank.
FEES: As set forth in a separate agreement between CGW, the
Agent and the Arranger.
VOLUNTARY PREPAYMENTS
AND COMMITMENT REDUCTIONS: The Borrowers would be permitted to voluntarily
terminate and prepay the loans subject to Eurodollar
breakage costs, if any. The Borrowers may terminate
and prepay the loans in years without penalty.
Voluntary reductions of the Revolver and Capex
Facility commitments shall be permitted in whole or
in part with prior
Fleet Capital Corporation. 10 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 11
notice in a minimum amount of $500,000 and increments
of $100,000, but without premium or penalty.
MANDATORY PREPAYMENTS: Subject to certain baskets and other permissible
amounts to be determined, the Borrowers will be
required to make mandatory prepayments of the Credit
Facilities equal to:
- 50% of Excess Cash Flow, computed on the
basis of the Borrowers' annual audited
financial statements. Excess Cash Flow shall
mean, for any fiscal year of the Borrowers,
consolidated earnings before interest,
taxes, depreciation and amortization and any
other non-cash charges minus actual cash
taxes paid, non-financed capital
expenditures and scheduled debt service
payments (including total interest and
actual and scheduled repayments of principal
of any money borrowed or capital lease
obligation), for such fiscal year,
determined in accordance with GAAP; to the
extent Total Funded Debt/EBITDA is less than
3.0:1 then the percentage of Excess Cash
Flow applied to prepayment will decrease to
25%.
- 100% of the net proceeds received from the
sale of or disposition of all or any part of
the assets of the Borrowers or any Guarantor
(other than in the ordinary course of
business or for consideration pertaining to
sales not in the ordinary course of business
not to exceed in any fiscal year of the
Borrowers an aggregate amount to be
determined).
- 100% of the net proceeds received from the
issuance of debt or equity in excess of $5
million by the Borrower or any Guarantor,
except to the extent issued to a seller of a
business acquired by the Company. In the
event of an IPO, the percentage applied to
prepayment will be 50% of the net proceeds.
Mandatory prepayments shall be applied pro rata to
prepay without penalty or premium installments of the
Term Loan and Capex Facility loans in the inverse
order of maturity thereof. After the Term Loan and
Capex Facility loans have been repaid in full,
mandatory prepayments will be applied to the Revolver
and the commitment therefor will be permanently
reduced in the amount of any such prepayment.
FINANCIAL COVENANTS: Initially, to be tested monthly commencing the first
month following Closing, on a consolidated, rolling
twelve month basis (where applicable, including
trailing twelve month for future Permitted
Acquisitions), including, but not limited to, the
following:
- Maximum Total Funded Debt to EBITDA
[Covenant levels to be mutually determined];
- Minimum Fixed Charge Coverage Ratio
[Covenant levels to be mutually
Fleet Capital Corporation. 11 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 12
determined];
- Minimum EBITDA/Interest Ratio [Covenant
levels to be mutually determined];
- Maximum Capital Expenditures [Covenant
levels to be mutually determined].
Assuming full covenant compliance and reasonable
adherence to projections, the Agent and Arranger will
consider relaxing covenant testing to quarterly in
years 2 through 5.
OTHER COVENANTS: Usual and customary for transactions of this nature,
and subject to limitations and exceptions to be
mutually agreed, including, but not limited to
limitations on additional indebtedness, liens,
investments, mergers and consolidations, asset sales,
transactions with affiliates, negative pledges,
restricted payments, distributions and dividends.
PERMITTED ACQUISITIONS: Prior consent of majority Lenders shall be required
for acquisitions with total consideration of more
than $15 million. Prior consent shall not be required
for acquisitions with total consideration of up to
$15 million, provided the conditions to outlined
below are met. Each such acquisition shall be defined
as a "Permitted Acquisition":
- Target shall be in a line of business
substantially similar to the Borrowers'
existing lines.
- Proposed acquisition shall be "friendly".
- Borrowers shall provide notice of proposed
acquisition, including an information
package for Lenders at least 14 days in
advance of the proposed drawdown in order to
confirm that the conditions set forth herein
are satisfied.
- Target shall have had positive trailing
twelve month pro forma EBITDA (as adjusted
for anticipated expense reductions, etc.,
referred to below).
- Acquisition structure shall meet minimum
requirements to be detailed in the Credit
Agreement or shall be otherwise reasonably
acceptable to the Lenders. Such conditions
shall include, without limitation,
requirements that the Borrowers shall own
directly or indirectly a majority of the
equity interests in the target and shall
control a majority of any voting securities,
and/or shall otherwise control the
governance of the target.
- Security interest shall be granted in all of
the target company's assets;
Fleet Capital Corporation. 12 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 13
the target company shall be merged into the
Borrowers, or if it is to be a subsidiary of
the Borrowers shall become an obligor under
the Facilities.
- The terms of any seller paper or
subordinated debt issued or incurred in
connection with the acquisition shall meet
minimum requirements to be detailed in the
Credit Agreement or shall be otherwise
reasonably acceptable to the Lenders. Such
conditions shall include, without
limitation, a maximum cash interest rate, a
cap on amortization of principal prior to
maturity and repayment of the Facilities,
the absence of financial covenants or
security interests and minimum standards for
subordination.
- No default or event of default shall exist
at the time of or after giving effect to the
acquisition; Borrowers shall demonstrate pro
forma covenant compliance based on combined
pro forma trailing twelve month operating
performance, pro forma debt and pro forma
debt service based on pro forma interest on
total debt at then prevailing interest
rates. Any pro forma adjustments to
historical EBITDA of the target company
shall be acceptable to the Lenders in their
reasonable discretion (provided that
contractual and adequately documented
reductions in former owner's compensation,
insurance and/or rental expense, which will
be effective as of the drawdown date, shall
be deemed acceptable).
- Commercial finance exams and appraisals, in
the agent's reasonable discretion, and phase
i environmental surveys satisfactory to the
agent and lenders if real estate is
involved.
- Excess availability after giving effect to
the acquisition will be at least $30mm.
FINANCIAL REPORTING: Borrowers will agree to provide the following
reports:
Annual financial statements prepared on a
consolidated basis in accordance with gaap for the
current and prior fiscal year, all certified by a
nationally recognized firm of certified public
accountants and accompanied by an unqualified opinion
of such firm on the annual financial statements,
accompanied by covenant compliance calculations and a
representation by the Chief Financial Officer of the
company that no event of default shall have occurred
or be continuing, all submitted to the agent and
lenders within 100 days of the end of each fiscal
year.
Monthly financial statements prepared on a
consolidated basis in accordance with gaap for the
current and prior fiscal year accompanied by covenant
compliance calculations and a representation by the
chief financial officer of the company that no event
or default shall have occurred or be continuing, all
Fleet Capital Corporation. 13 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 14
submitted to the agent and lenders within 30 days of
the end of each month.
CONDITIONS PRECEDENT: In addition to the usual and customary conditions to
lending in transactions of the type contemplated
herein, the obligation of the agent and the lenders
to provide the credit facilities shall be subject to
(but not limited to) the following conditions at or
prior to the closing date on a basis satisfactory to
the agent:
- Consummation of the acquisition of capital
stock of Cameron on terms and conditions
reasonably satisfactory to the agent.
- Evidence that affiliates and associates of
CGW Southeast Partners IV, LP have invested
not less than $55 million as common equity.
- Borrowers shall have issued and received
gross proceeds of not less than $55,000,000
from the issuance of senior subordinated
notes (the "Senior Subordinated Notes") on
terms and conditions reasonably satisfactory
to the agent.
- A review satisfactory to the agent and its
counsel of all matters related to the
company's environmental liability, if
applicable.
- Satisfaction that the financial statements
delivered to the agent fairly present the
business and financial condition of cameron
(and on a pro forma basis, of the borrowers)
and their subsidiaries.
- The agent and the arranger shall have
received projections satisfactory to them
with respect to the borrowers and their
subsidiaries, monthly for the fiscal 2000
period, quarterly through fiscal 2001 and
annually thereafter.
- No material adverse change, in the
reasonable judgment of the agent and
arrangers, shall have occurred in the
business, assets or financial condition of
cameron and its subsidiaries taken as a
whole since the most recent financial
statements provided to the agent.
- The absence of any default or event of
default under the loan documentation or
under any material contract or agreement of
the borrowers and their subsidiaries; and
accuracy of representations and warranties
in all material respects.
- At closing, the ratio of total funded debt
divided by pro forma EBITDA for the latest
twelve month period then ended, on a
consolidated basis, shall not exceed [to be
determined]. For the purposes of this
calculation only, total funded debt shall be
adjusted to reflect the borrowers' average
working capital investment.
- The agent shall have received a reasonably
satisfactory pro forma closing balance
sheet, adjusted to give effect to
transactions contemplated hereby.
Fleet Capital Corporation. 14 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 15
- The negotiation, execution and delivery of
loan and security documentation reasonably
satisfactory in form and substance to the
borrowers, agent and the arranger and their
respective counsel, all of which shall be in
full force and effect on the closing date,
and the perfection of all security
interests.
- There being no order or injunction or other
pending litigation in which there is a
reasonable possibility of a decision which
would materially adversely affect the
ability of the borrowers or any subsidiaries
to perform under the loan documents or the
agent's or lenders' rights in respect
thereof or their ability to exercise such
rights.
- Other conditions precedent specific to the
transaction and typical of facilities of
this type, including the agent's receipt of
satisfactory corporate approval of the
capital stock acquisition and the related
financings as well as opinions of counsel
satisfactory to the agent as to, among other
matters, valid corporate existence and
authority, legality, validity and binding
effect of all loan, guaranty and security
documents, perfection of security interests,
the absence of any violation of law or
regulation or conflict with any existing
contracts.
DOCUMENTATION: The credit facilities are subject to negotiation,
execution and delivery of a definitive credit
agreement and related security documents, guarantees
and any other documents as shall be reasonably
requested by the agent. The credit agreement and
related security agreements will contain conditions
precedent, covenants, full cash dominion, events of
default and other provisions appropriate for
transactions of this size, type and purpose and
acceptable to the parties and their respective
counsel.
EVENTS OF DEFAULT: Usual and customary, including (without limitation)
nonpayment, misrepresentation, breach of covenant or
agreement, insolvency, bankruptcy, erisa, judgments,
change of control and cross defaults. No grace
periods on principal payments, certain other notices
or grace periods and/or thresholds to be agreed upon.
ASSIGNMENT AND
PARTICIPATIONS: Usual and customary for transactions of this type and
size. Each lender may assign all or a portion of its
loans and commitments under the facilities, or sell
participations therein to another person(s), provided
that assignments shall be in a minimum amount of $5
million and shall be subject to certain conditions,
including but not limited to, the approval of the
borrowers (so long as no default or event of default
exists) and the agent, such approvals not to be
unreasonably withheld.
SYNDICATION MATTERS: Fleet will act as the exclusive administrative agent
for the facilities and brsi will act as the exclusive
arranger, adviser and syndication manager for the
facilities and, in such capacities, each of fleet and
brsi will perform the duties and exercise the
authority customarily associated with such roles. No
additional agents, co-agents, arrangers or
syndication
Fleet Capital Corporation. 15 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 16
managers will be appointed, unless the borrowers and
each of Fleet and BRSI so agree.
Prior to or after the execution of definitive
documentation for the facilities, Fleet reserves the
right to syndicate all or a portion of its commitment
to one or more financial institutions after
consultation with the borrowers and BRSI. Upon the
acceptance by Fleet of the written commitment of any
lender to provide a portion of the facilities, Fleet
shall be released from a portion of its commitment in
an aggregate amount equal to the commitment of such
lender.
BRSI will manage all aspects of the syndication,
including the selection of lenders, the determination
of when BRSI will approach potential lenders and the
final allocations among the lenders. The borrowers
agree to assist BRSI actively in achieving a timely
syndication that is reasonably satisfactory to BRSI,
such assistance to include, among other things, (a)
direct contact during the syndication between the
borrowers' senior officers, representatives and
advisors, on the one hand, and prospective lenders,
on the other hand at such times and places as BRSI
may reasonably request, (b) providing to BRSI all
financial and other information with respect to the
borrowers and the transactions contemplated that BRSI
may reasonably request, including but not limited to
financial projections relating to the foregoing, and
(c) assistance in the preparation of a confidential
information memorandum and other marketing materials
to be used in connection with the syndication.
The borrowers agree that, prior to and during the
syndication of the Facilities, except for the senior
subordinated notes, the borrowers will not permit any
offering, placement or arrangement of any competing
issues of debt securities or commercial bank
facility(ies) of any borrower and any of its
subsidiaries.
Fleet and BRSI shall be entitled, after consultation
with the borrower, to change the pricing, structure,
terms or amount of any portion of the facilities if
fleet and brsi determine that such changes are
advisable in order to ensure a successful syndication
or an optimal credit structure for the Facilities so
long as the aggregate amount of the Facilities shall
not be reduced.
EXPENSES AND
INDEMNIFICATION: The Borrowers and Guarantors will pay the Agent's and
Arranger's reasonable legal, due diligence, and other
out-of-pocket expenses incurred in connection with
the negotiation, preparation and execution of the
documentation and the establishment of the syndicate,
regardless of whether the Facilities close. The
Borrowers and the Guarantors jointly and severally
shall indemnify the Agent, the Arranger and the
Lenders (and all respective affiliates) against all
losses, liabilities, claims, damages or expense
relating to their loans, the loan documents, the
Borrowers' use of loan proceeds or the commitments,
including but not limited to attorneys and other
professional fees and settlement costs,
Fleet Capital Corporation. 16 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 17
excluding those arising from the indemnified party's
own bad faith, gross negligence or willful
misconduct.
AGENTS COUNSEL: Hunton & Williams
Atlanta, Ga.
GOVERNING LAW: State of Georgia.
Fleet Capital Corporation. 17 CONFIDENTIAL
BancBoston Robertson Stephens Inc.
<PAGE> 1
EXHIBIT D
January 13, 2000
HIGHLY CONFIDENTIAL
Mr. Bart McLean
Partner
Cravey, Green & Wahlen
Twelve Piedmont Center, Suite 210
Atlanta, GA 30305
Dear Bart:
On behalf of J. H. Whitney & Co. ("J. H. Whitney" or "Whitney") we would like to
thank you for your time and consideration as we work together to structure an
investment in Cameron Ashley Building Products, Inc. (together with its
subsidiaries, "CABP" or the "Company"). We are enthusiastic about the
possibility of partnering with CGW Southeast Partners IV, L.P. ("CGW") and the
management team to make an investment in CABP.
COMMITMENT
WMF is pleased to commit $55 million of senior subordinated notes (the "Notes")
based on the terms and conditions outlined in this letter and in Attachment A.
This commitment shall terminate on March 31, 2000 unless otherwise extended in
writing by WMF.
SOURCES AND USES
We understand that the sources and uses for the proposed transaction would be as
follows, subject to seasonal swings:
(Dollars in millions):
<TABLE>
<CAPTION>
SOURCES USES
- -------------------------------------- -----------------------------------
<S> <C> <C> <C>
New Revolver (a) $138.6 Purchase CABP Equity $134.5
Term Loan 65.0 Refinance Existing Debt 162.1
Senior Subordinated Notes 55.0 Fees and Expenses 17.0
Common Equity 55.0
------ ------
TOTAL SOURCES $313.6 TOTAL USES $313.6
====== ======
</TABLE>
(a) $225.0 million committed facility at closing.
We understand the senior debt financing will be led by Fleet, and has the
following key terms: $225 million revolver (5 year maturity, Libor + 275 bps);
$65 million term loan (6 year maturity, Libor + 325bp); $25 million Capital
Expenditures facility (5 year maturity, Libor + 325bps). Borrowings outstanding
under the revolver at closing are expected to be approximately $140 million.
<PAGE> 2
OWNERSHIP SUMMARY
The expected ownership of the Company at closing will be as follows:
<TABLE>
<CAPTION>
PRO FORMA FULLY DILUTED OWNERSHIP
- -------------------------------------------------
<S> <C>
CGW & Prospective Co-investors 96.0%
WMF 4.0%
-----
Total Ownership 100.0%
=====
</TABLE>
Note: We expect a management option plan to be in place at close, which will not
dilute the WMF ownership.
CONDITIONS TO CLOSING
The following describes the conditions to funding the Notes:
- - DUE DILIGENCE. Our definitive offer and our entering into detailed
definitive documents for this transaction are conditioned upon the
completion of our business, financial, legal, regulatory, tax and
accounting due diligence, the results of which must be to our
satisfaction. Specifically, we expect this to include, but not be
limited to:
1. Legal due diligence, including environmental and tax due
diligence.
2. Key customer calls.
3. Key supplier calls.
4. Personal reference checks and background checks on the senior
management team.
5. A detailed review of PriceWaterhouseCoopers' ("PWC")
accounting due diligence findings. WMF will have the right to
expand the scope of PWC's work as it deems necessary; the cost
of such additional work will not exceed $25,000 unless
otherwise approved by CGW, such approval not to be
unreasonably withheld. PWC will be available to discuss its
work with both the WMF and potential assignees of the Notes.
6. A detailed discussion/meeting with Nathan Gordon, the CEO of
Buildnet.com.
- - MATERIAL ADVERSE CHANGE. There shall exist no change which could have a
material adverse impact on the Company's business, condition (financial
or otherwise), value, prospects or assets since December 15, 1999.
- - MATERIAL MISSTATEMENTS. There shall exist no material misstatements in
or omissions from the materials which have previously been furnished in
writing to us for our review, when taken as whole and in light of the
circumstances in which such materials are presented.
- - CONDUCT OF BUSINESS. Prior to closing, the Company will conduct its
business only in the normal course. In addition, the Company's
shareholders will do nothing, which could impair the value of its
business, and there will be no extraordinary payments, transactions,
dividends or bonuses made without
<PAGE> 3
the written consent of WMF.
- - DOCUMENTATION. Our proposal is conditioned upon satisfactory completion
and adoption of amendments to the Company's by-laws and certificate of
incorporation, and satisfactory negotiation and execution of detailed
definitive purchase, shareholder and other agreements necessary to
provide WMF with the rights described in this letter, in each case in
form and substance satisfactory to us.
- - ACCESS. JHW will have adequate access to the Company's books, records,
and personnel for the purpose of conducting a thorough due diligence
investigation, and JHW and CGW agree to negotiate promptly,
continuously, and in good faith up to and including the closing date.
- - AUTHORIZATIONS; CONSENTS. All applicable third party consents and
government authorizations, if any, shall have been obtained.
- - OTHER CONDITIONS.
- CGW and prospective co-investors will complete the acquisition
of CABP on terms and conditions acceptable to WMF.
- CGW and prospective co-investors will lead a common equity
investment of at least $55.0 million, of which at least $2.0
million will be invested by management.
- The management team led by Ronald Ross will remain in place.
- The Company generated EBITDA of $54.7 million (including $2.9
million of add-backs relating to the CARE project and the
discontinuation of Cameron Ashley Financial Services) for the
trailing twelve months ended October 31, 1999.
- Upon closing, senior financing of at least $315 million shall
be in place with unused availability under the revolver
acceptable to WMF. Such senior financing shall be on terms
acceptable to WMF, including scheduled amortization of no more
than $7.5 million in loan year 1, $10 million in loan year 2,
and $12.5 million in loan year 3 and thereafter and
subordination terms shall be acceptable to WMF.
- CGW and management will agree to assist and cooperate with the
syndication of the Notes, as reasonably requested by WMF.
COSTS & EXPENSES
By execution of this letter, CGW agrees to pay all costs, fees and expenses
(including, without limitation, all legal fees and disbursements) incurred or to
be incurred by J. H. Whitney & Co. and/or WMF in connection with the
examination, review, documentation, and/or closing of this transaction, assuming
WMF is prepared to fund the Notes substantially on the terms herein, whether or
not this transaction ultimately closes.
<PAGE> 4
EXCLUSIVITY
By signing this letter you agree that you will deal exclusively with J.H.
Whitney & Co. and WMF on this transaction and will end discussions with all
other potential subordinated debt and mezzanine investors in the Company (other
than potential participants in the Notes) beginning on the date you countersign
this agreement and continuing through March 31, 2000 (the "Exclusivity Period").
J.H. Whitney & Co., WMF and their affiliates will be granted access to the
Company's books, records and personnel for the purpose of conducting a thorough
due diligence investigation, and J.H. Whitney & Co., WMF and CGW agree to
negotiate promptly, continuously and in good faith up to and including the
closing date. If the transaction proposed herein is closed within one year from
the end of the Exclusivity Period, without WMF financing, and the WMF is
prepared to consummate the proposed financing on substantially the same terms
set forth herein, then an Opportunity Cost Fee of $500,000 will be paid to
J.H.Whitney & Co. by the undersigned.
INDEMNIFICATION
By executing this letter, CGW agrees, regardless of whether or not the
Transaction is ultimately completed, to indemnify and hold harmless WMF, J. H.
Whitney & Co., their respective affiliates and each of their respective
partners, officers, directors, representatives, employees and agents, from and
against all and any losses, claims, damages, and liabilities resulting from or
arising out of: (i) any breaches of this letter by CGW, or (ii) any litigation,
investigation or proceeding initiated or brought by any third party (other than
any affiliate, partner, officer, director, agent, employee or representative of
WMF or J. H. Whitney) relating hereto or thereto, and to reimburse upon demand
each of such indemnified parties currently and from time to time for any
reasonable legal or other expenses incurred in connection with investigating or
defending any of the foregoing; provided that the foregoing indemnity will not
apply to any losses, claims, damages, liabilities or related expenses to the
extent a court of competent jurisdiction shall have determined in a final
judgment that is not subject to further appeal that the foregoing shall have
resulted from the willful misconduct or gross negligence of any indemnified
party. CGW will be relieved of its obligation under the "Indemnification"
section if, in connection with the closing of the Transaction, the Company
assumes all such obligations of CGW on terms reasonably acceptable to WMF and
J.H. Whitney & Co.
PUBLIC DISCLOSURE
J.H. Whitney, WMF and CGW jointly will agree on the timing and content of any
disclosure relating to WMF's investment in the Company prior to its initial
public dissemination, and no such disclosure shall be made without our consent.
Prior to any such dissemination, our identity and interest in the Company shall
not be disclosed by CGW or any of its prospective co-investors or advisors.
TIMING / NEXT STEPS
This letter constitutes a commitment based on information that we have received
to date with respect to our potential investment in the Company. We are prepared
to dedicate our firm's resources and to move forward quickly towards finalizing
a WMF investment alongside the proposed equity investment by CGW and prospective
co-investors.
EXPIRATION OF J. H. WHITNEY'S COMMITMENT
This letter will expire at 5:00 p.m. on January 14, 2000, unless this letter has
been agreed to, accepted and executed by CGW and received by the undersigned
care of J.H. Whitney at the address set forth above. This letter shall be
governed by and construed in accordance with the laws of the state of New York
(without regard to principles or conflicts of law).
<PAGE> 5
The entire J. H. Whitney partnership is enthusiastic about partnering with
Cravey, Green & Wahlen on this potential investment in Cameron Ashley Building
Products, Inc.
Very truly yours,
Joseph D. Carrabino, Jr. Elise T. Chowdhry David E. Kroin
General Partner Vice President Senior Associate
Agreed to and Accepted by:
Cravey, Green & Wahlen
By: /S./ Bart A. McLean Date: 1/13/00
------------------------------ -------
Title: Partner
----------------------------
<PAGE> 6
ATTACHMENT A
SENIOR SUBORDINATED DEBT TERM SHEET
Issuer: Cameron Ashley Building Products, Inc. ("CABP" or
the "Company"). Assumed to be same issuer as under
the Senior Credit Facility.
Purchaser: J.H. Whitney Mezzanine Fund, L.P. ("WMF" or the
"Purchaser"). The Purchaser expects to syndicate,
assign or sell a portion of the Notes.
Issue: Senior Subordinated Notes (the "Notes").
Amount of Issue: US $55.0 million.
Targeted Closing Date: To be determined, but expected to be around March
15, 2000 Targeted Closing Date:
Purchase Price: 100% of the Face Amount ("Par").
Maturity/Term: Eight years from the closing date.
Amortization: Bullet payment at Maturity.
Interest Rate: The Notes will bear interest at a fixed annual
interest rate equal to fifteen percent (15.0%),
payable each calendar quarter in arrears, of which
thirteen percent (13.0%) will be paid in cash and
two percent (2.0%) will be paid-in-kind or
compounded quarterly at the Interest Rate and paid
upon the earlier of the Maturity or upon a Liquidity
Event (as hereinafter defined).
Subordination: The Notes will be subordinated in payment to the
Company's Senior Indebtedness. Subordination
language satisfactory to WMF will be negotiated with
the Senior Lenders. The Notes will be senior to all
existing and future subordinated debt and seller
debt.
Guarantees: To be determined based upon Senior Credit Facility.
Board of Directors: WMF will be entitled to Board observation rights.
The Board of Directors will have no fewer than 4
quarterly meetings annually.
<PAGE> 7
ATTACHMENT A
SENIOR SUBORDINATED DEBT TERM SHEET
Documentation: Documentation will contain such terms,
conditions, representations, warranties,
reporting requirements, covenants, including
financial covenants, customary for
investments of this type, and subordination
terms as WMF or its affiliates may require.
Financial and Other Covenants: Customary for transactions of this type,
including but not be limited to quarterly
tests of: interest and fixed charge coverage
ratio; leverage ratio and capital
expenditure limitations; limitation on total
indebtedness; limitation on sale or merger
of business; and other provisions and
negative covenants which measure and protect
the creditworthiness of the Company.
Events of Default: Customary Events of Default will include but
are not limited to: (i) failure to pay
interest or principal when due and payable;
(ii) failure to comply with the applicable
Purchase Agreements including violation of
covenants; (iii) failure to discharge
material judgments; (iv) bankruptcy or
insolvency.
Optional Prepayment: The Notes may be prepaid in any Loan Year
following the closing in accordance with the
schedule below and at the following
redemption prices (expressed in percentages
of principal amount to be prepaid), plus
accrued interest to the date of the
prepayment:
<TABLE>
<CAPTION>
Loan Year (1) Redemption Price
-------------- ----------------
<S> <C>
2000 105.0%
2001 103.0%
2002 102.0%
2003 101.0%
2004 and thereafter 100.0%
</TABLE>
(1) Year 2000 begins on the Closing Date;
each subsequent year begins on the
anniversary date of the closing.
<PAGE> 8
ATTACHMENT A
SENIOR SUBORDINATED DEBT TERM SHEET
Mandatory Repayment: WMF will have the right to repayment upon a
Liquidity Event (defined as a liquidation,
winding up, change of control merger, sale
of all or substantially all of the assets of
the Company or an initial public offering
("IPO")). Redemptions under this clause will
be at the prices set forth above under the
Optional Prepayment clause, except in the
case of a sale of all or substantially all
of the assets of the Company or an IPO of
the Company, in which case redemption will
be at 101.0% through Loan Year 2003.
Warrants or Equivalent Shares: At the closing of this transaction, the
Purchaser will receive detachable warrants
or other securities which provide an
equivalent equity value in the Company (the
"Warrants") to acquire four percent (4.0%)
of the fully diluted stock or value in the
Company at closing. The Warrants will have a
nominal exercise price and will include a
cashless exercise feature. WMF will receive
S-3 and piggyback registration rights, tag
along/co-sale, pre-emptive and anti-dilution
provisions satisfactory to WMF. In addition,
WMF will grant drag-along rights to the
issuer.
Conditions to Closing: Conditions to closing are outlined in the
attached letter dated January 13, 2000.
<PAGE> 1
EXHIBIT E
JOINT FILING AGREEMENT
This will confirm the agreement by and among all of the
undersigned that the Schedule 13D filed on or about this date with respect to
the beneficial ownership by the undersigned of Common Stock of Cameron Ashley
Building Products, Inc. is being, and any and all amendments to such Schedule
may be, filed on behalf of each of the undersigned. This Agreement may be
executed in two or more counterparts, each of which will be deemed an original,
but all of which together shall constitute one and the same instrument.
Dated: January 28, 2000
CITICORP VENTURE CAPITAL, LTD.
By: /s/ Byron Knief
-----------------------------------------
Name: Byron Knief
Title: Senior Vice President
CITIBANK, N.A.
By: /s/ Kenneth Cohen
-----------------------------------------
Name: Kenneth Cohen
Title: Assistant Secretary
CITICORP
By: /s/ Kenneth Cohen
----------------------------------------
Name: Kenneth Cohen
Title: Assistant Secretary
CITIGROUP HOLDINGS COMPANY
By: /s/ Kenneth Cohen
----------------------------------------
Name: Kenneth Cohen
Title: Assistant Secretary
CITIGROUP INC.
By: /s/ Joan Caridi
-----------------------------------------
Name: Joan Caridi
Title: Assistant Secretary