EXHIBIT 1.1
KEVCO, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
_______________
UNDERWRITING AGREEMENT
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____________
_______________, 1996
Rauscher Pierce Refsnes, Inc.
Oppenheimer & Co., Inc.,
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Rauscher Pierce Refsnes, Inc.
Cityplace
2711 N. Haskell Avenue, Suite 2400
Dallas, Texas 75204-2936
Dear Sirs:
Kevco, Inc., a Texas corporation (the "Company"), proposes, subject to
the terms and conditions stated in this Underwriting Agreement (this
"Agreement"), to issue and sell to the Underwriters named in Schedule I hereto
(the "Underwriters") an aggregate of 2,100,000 shares, and at the election of
the Underwriters solely for the purpose of covering over-allotments, up to
315,000 additional shares, of Common Stock, par value $.01 per share ("Stock"),
of the Company. The aggregate of 2,100,000 shares to be sold by the Company is
herein called the "Firm Shares" and the aggregate of 315,000 additional shares
to be sold by the Company is herein called the "Optional Shares." The Firm
Shares, and the Optional Shares which the Underwriters elect to purchase
pursuant to Section 3 hereof, are herein collectively called the "Shares."
The parties to this Agreement understand that the Company's operations
are currently being conducted through Kevco Texas, Inc., a Texas corporation
("Kevco Texas"). After the date of this Agreement and prior to the First Time
of Delivery (as defined in Section 5 hereof), the following transactions will be
effected in the order indicated: (a) the shareholders of Kevco Texas will
exchange each of their outstanding shares of Kevco Texas Common Stock, par value
$.01 per share (the "Kevco Texas Stock"), for one share of Stock (the
"Exchange"), (b) immediately after consummation of the Exchange, Kevco Texas
will be renamed Kevco Delaware, Inc.
pursuant to a merger in which Kevco Texas will merge into Kevco Delaware, Inc.,
a Delaware corporation ("Kevco Delaware"), pursuant to a Plan and Agreement of
Merger (the "Merger Agreement") in the form filed as Exhibit 2.2 to the
Registration Statement (as defined in Section 1(a) hereof) (the "Merger"), with
Kevco Delaware being the surviving corporation of the Merger, and (c)
immediately after consummation of the Merger, Kevco Delaware will assign and
transfer to Sunbelt Wood Components, Inc., a Delaware corporation ("Sunbelt"),
pursuant to a Bill of Sale and General Assignment (the "Bill of Sale") in the
form filed as Exhibit 2.3 to such Registration Statement, assets and properties
of the Sunbelt Wood Components Division (the "Division") of Kevco Delaware in
consideration of the issuance to Kevco Delaware by Sunbelt of shares of Sunbelt
common stock and the assumption by Sunbelt of obligations and liabilities of the
Division (such assumption to occur pursuant to an Assumption Agreement (the
"Assumption Agreement") in the form filed as Exhibit 2.4 to such Registration
Statement). The transactions described in the immediately preceding sentence are
hereinafter collectively referred to as the "Restructuring." The Merger
Agreement, the Bill of Sale and the Assumption Agreement are hereinafter
collectively referred to as the "Restructuring Documents." From and after the
time of consummation of the Restructuring, each reference in this Agreement to
any subsidiary or subsidiaries of the Company shall include Kevco Delaware, as
successor by Merger to Kevco Texas, and Sunbelt.
In addition, prior to the Exchange, Kevco Texas will execute and
deliver to its shareholders the "Prior S Corporation Earnings Note" and the
"Future S Corporation Earnings Note," as such terms are discussed and defined in
the Registration Statement under the caption "Prior S Corporation Status." The
Prior S Corporation Earnings Note and the Future S Corporation Earnings Note are
referred to collectively in this Agreement as the "S Corporation Notes." The
execution and delivery of the S Corporation Notes to the shareholders of Kevco
Texas as provided above are referred to in this Agreement as the "S Corporation
Distribution."
1. The Company represents and warrants to, and agrees with, each of
the Underwriters that, as of the date of this Agreement and as of each Time of
Delivery (as defined in Section 5 hereof):
(a) A registration statement on Form S-1 (File No. 333-11173) in
respect of the Firm Shares and Optional Shares has been filed with the
Securities and Exchange Commission (the "Commission"); such registration
statement and any post-effective amendment thereto, each in the form
heretofore delivered to you, and, excluding exhibits thereto, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; no other document with respect to such registration
statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of such registration statement has been issued
and no proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424(a) of the rules
and regulations of the Commission under the Securities Act of 1933,
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as amended (the "Act"), is hereinafter called a "Preliminary Prospectus";
the various parts of such registration statement, including all exhibits
thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act
in accordance with Section 6(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the registration statement at the time it was
declared effective, each as amended at the time such part of the
registration statement became effective, are hereinafter called the
"Registration Statement"; and such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of the
Commission thereunder, and did not contain 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 the light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through you expressly for use
therein;
(c) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder and do not
and will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto and as of the applicable filing date as
to the Prospectus and any amendment or supplement thereto, contain 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 not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
you expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, that is
material to the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock, material change in the short-term debt or long-term debt of
the Company or any of its subsidiaries or any material adverse
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change in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and indefeasible
title in fee simple to all material real property and good and sufficient
title for the use made and proposed to be made of all material personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any material real property and buildings
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(f) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Texas, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, except where the failure to be so qualified will not have a
material adverse effect on the Company and its subsidiaries considered as a
whole; and each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation and is in good standing under the laws of
its jurisdiction of incorporation, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, except where
the failure to be so qualified will not have a material adverse effect on
the Company and its subsidiaries considered as a whole;
(g) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and non-
assessable and conform to the description thereof contained in the
Prospectus; and all of the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims other than a
security interest granted in favor of the lenders under the Credit Agreement
dated June 30, 1995, among the Company and NationsBank of Texas, N.A., as
Administrative Lender, as amended (the "Credit Agreement");
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(h) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding agreement of
the Company and is enforceable against the Company in accordance with its
terms, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by general equitable principles;
(i) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly authorized and, when issued and
delivered against payment therefor as provided herein, will be validly
issued and fully paid and nonassessable and will conform to the description
of the Stock contained in the Prospectus;
(j) The issue and sale of the Shares by the Company, the
compliance by the Company with all of the provisions of this Agreement, the
consummation of the Restructuring, the S Corporation Distribution and the
payment of the S Corporation Notes, and the consummation of the transactions
contemplated in this Agreement will not (after considering waivers or
consents that have been obtained) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement,
sale/leaseback agreement or other agreement or instrument (collectively, the
"Specified Documents") to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject (except where such breach or violation will not have
a material adverse effect on the Company and its subsidiaries considered as
a whole), nor will any such action result in any violation of the provisions
of the Articles or Certificate of Incorporation, as amended, or the By-laws
of the Company or any of its subsidiaries or any statute or any order, rule
or regulation of any court or government agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties; and
no consent, approval, authorization, order, registration or qualification of
or with any such court or government agency or body is required for the
issue and sale of the Shares, the consummation by the Company of the
transactions contemplated by this Agreement, the consummation of the
Restructuring, the S Corporation Distribution or payment of the S
Corporation Notes, except the registration under the Act of the Shares and
such consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters;
(k) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a material adverse effect on the consolidated
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financial position, stockholders' equity or results of operations of the
Company and its subsidiaries; and, to the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(l) The financial statements, including the notes thereto, of the
Company and its subsidiaries included in the Registration Statement and
Prospectus fairly present the financial condition of the Company and its
subsidiaries as of the dates indicated therein and the results of operations
and changes in financial position of the Company and its subsidiaries for
the periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise stated therein). The financial statements, including
the notes thereto, of Service Supply Systems, Inc. and its subsidiary
included in the Registration Statement and Prospectus fairly present the
results of operations and changes in financial position of Service Supply
Systems, Inc. and its subsidiary for the periods therein specified in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise stated
therein). Coopers & Lybrand L.L.P., who have audited the financial
statements, together with the related schedules and notes, entitled "Kevco,
Inc." as of December 31, 1995 and for the year then ended, and Rylander,
Clay & Opitz, L.L.P., who have audited the financial statements, together
with the related schedules and notes, of Kevco Texas as of December 31, 1994
and for each of the years in the two years ended December 31, 1994, and
Rumsey & Huckaby, P.C., who have audited the financial statements, together
with the related schedules and notes, of Service Supply Systems, Inc. and
its subsidiary for each of the years in the three years ended December 31,
1994, each as filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder;
(m) As of the date of this Agreement, the Company does not have
any subsidiaries. As of each Time of Delivery, Kevco Delaware and Sunbelt
will be wholly-owned subsidiaries, and the only subsidiaries, of the
Company;
(n) The Company and its subsidiaries each owns, or possesses
adequate rights to use, all the patents, trademarks, service marks, trade
names and copyrights ("Intellectual Property") necessary for the conduct of
its business as currently conducted by it, except where the failure to so
own or possess the rights to use will not have a material adverse effect on
the Company and its subsidiaries considered as a whole. To the knowledge of
the Company, none of the activities engaged in by the Company infringes or
conflicts with Intellectual Property rights of others;
(o) The Company and its subsidiaries each owns or possesses all
governmental licenses, permits, certificates, consents, orders, approvals
and other authorizations issued by the appropriate state, federal or foreign
regulatory agencies or bodies (collectively,
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"Governmental Licenses") necessary to carry on its business as presently
conducted, with such exceptions as do not have a material adverse effect on
the financial condition or results of operations of the Company and its
subsidiaries, considered as a whole, and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to revocation
or modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the financial condition or results
of operations of the Company and its subsidiaries, considered as a whole;
(p) Except as set forth in the Prospectus, no person has (i) any
right to require the Company to register any securities under the Act or
(ii) the preemptive right to acquire any securities of the Company;
(q) Neither the Company nor any of its subsidiaries does business
with the Government of Cuba or with any person or affiliate located in Cuba,
and the Company is not required by Section 517.075, Florida Statutes, to
disclose in the Prospectus any information regarding doing business with the
Government of Cuba or with any person or affiliate located in Cuba;
(r) Neither the Company nor any of its subsidiaries is (i) in
violation of its Articles or Certificate of Incorporation or By-laws, (ii)
in default in the performance or observance of any Specified Document to
which it is a party or by which it or any of its properties may be bound or
(iii) in violation of any applicable statute or any applicable order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties, except, in the case of Clauses (ii) and (iii), where such
default or violation will not have a material adverse effect on the
financial condition or results of operations of the Company and its
subsidiaries, considered as a whole;
(s) The statements set forth in the Prospectus under the caption
"Description of Capital Stock," insofar as they purport to constitute a
summary of the terms of the Stock, are accurate in all material respects;
(t) The Company is not, and after giving effect to the offering
and sale of the Shares, will not be, an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(u) The Restructuring will be consummated in accordance with
applicable law and the terms of the Restructuring Documents prior to the
First Time of Delivery; and
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(v) For federal income tax purposes, (i) neither Kevco Texas nor
the Company will recognize gain or loss as a result of the Exchange, (ii)
neither Kevco Delaware, Kevco Texas nor the Company will recognize gain or
loss as a result of the Merger, (iii) neither Kevco Delaware nor Sunbelt
will recognize gain or loss as a result of the transfer of the Division from
Kevco Delaware to Sunbelt and (iv) Kevco Texas will recognize no gain or
loss as a result of the S Corporation Distribution.
2. Kevco Texas represents and warrants to, and agrees with, each of
the Underwriters that, as of the date of this Agreement:
(a) Kevco Texas has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Texas, with
power and authority (corporate and other) to own its properties and conduct
its business, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases property, or conducts any business,
so as to require such qualification, except where the failure to be so
qualified will not have a material adverse effect on Kevco Texas;
(b) The authorized capital stock of Kevco Texas consists of
100,000,000 shares of Common Stock, $.01 par value per share, of which
4,394,500 shares are issued and outstanding. All of the issued and
outstanding shares of capital stock of Kevco Texas have been duly and
validly authorized and issued, are fully paid and non-assessable and are
owned directly or indirectly by the shareholders of Kevco Texas, free and
clear of all liens, encumbrances, equities or claims other than the terms of
certain shareholder agreements among Kevco Texas and its shareholders that
will be terminated in full prior to or upon the consummation of the
Exchange. Kevco Texas has no subsidiaries;
(c) This Agreement has been duly authorized, executed and
delivered by Kevco Texas and constitutes the valid and binding agreement of
Kevco Texas and is enforceable against Kevco Texas in accordance with its
terms, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by general equitable principles;
(d) The compliance by Kevco Texas with all of the provisions of
this Agreement applicable to it, the consummation of the Restructuring, the
S Corporation Distribution and the payment of the S Corporation Notes, and
the consummation of the transactions contemplated in this Agreement will not
(after considering waivers or consents that have been obtained) conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any Specified Documents to which Kevco
Texas is a party or by which it is bound or to which any of the property or
assets of Kevco Texas is subject (except where such breach or violation
would not have a material adverse effect on Kevco Texas), nor will any such
action result in any violation
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of the provisions of the Articles of Incorporation, as amended, or the By-
laws of Kevco Texas or any statute or any order, rule or regulation of any
court or government agency or body having jurisdiction over Kevco Texas or
any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or government agency
or body is required for the consummation by Kevco Texas of the transactions
contemplated by this Agreement, the consummation of the Restructuring, the S
Corporation Distribution or the payment of the S Corporation Notes;
(e) The financial statements, including the notes thereto,
entitled "Kevco, Inc." included in the Registration Statement and Prospectus
fairly present the financial condition of Kevco Texas as of the dates
indicated therein and the results of operations and changes in financial
position of Kevco Texas for the periods therein specified in conformity with
generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise stated therein);
(f) The representations and warranties of the Company in Sections
1(d), 1(e), 1(k), 1(n), 1(o), 1(p), 1(q), 1(r) and 1(t) of this Agreement
are true and correct with respect to Kevco Texas as if each reference in
such sections to "the Company" or "the Company and its subsidiaries" or "the
Company and its subsidiaries considered as a whole" (or similar language)
referred instead to Kevco Texas; and
(g) The Restructuring will be consummated in accordance with
applicable law and the terms of the Restructuring Documents prior to the
First Time of Delivery.
3. Subject to the terms and conditions set forth in this Agreement,
(a) the Company agrees to issue and sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at a purchase price per share of $________, the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto and (b) in
the event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares to cover over-allotments in the sale of the Firm Shares
as provided below, the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the purchase price per share set forth in clause
(a) of this Section 3, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction, the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of the Optional Shares which all of the Underwriters are
entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 315,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for
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the sole purpose of covering over-allotments in the sale of the Firm Shares. Any
such election to purchase Optional Shares may be exercised only by written
notice from you to the Company, given within a period of 30 calendar days after
the date of this Agreement, setting forth the aggregate number of Optional
Shares to be purchased and the date on which such Optional Shares are to be
delivered, as determined by you but in no event earlier than the First Time of
Delivery (as defined in Section 5 hereof) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
4. Upon the authorization by you of the release of the Firm Shares
and, if applicable, the Optional Shares, the several Underwriters propose to
offer the Firm Shares and, if applicable, the Optional Shares, for sale upon the
terms and conditions set forth in the Prospectus.
5. Certificates in definitive form for the Shares to be purchased by
each Underwriter hereunder, and in such denominations and registered in such
names as Rauscher Pierce Refsnes, Inc. may request upon at least 48 hours' prior
notice to the Company, shall be delivered by or on behalf of the Company to you
for the account of such Underwriter, against payment by such Underwriter or on
its behalf of the purchase price therefor by certified or official bank check or
checks or wire transfer, payable to the order of the Company in same day funds,
or by payment in such other manner as shall be agreed to in writing by the
Company and Rauscher Pierce Refsnes, Inc., all at the offices of Rauscher Pierce
Refsnes, Inc. in Dallas, Texas. The time and date of such delivery and payment
shall be, with respect to the Firm Shares, 9:00 a.m., Dallas time, on
___________________, 1996, or at such other time and date as you and the Company
may agree upon in writing, and, with respect to the Optional Shares, 9:00 a.m.,
Dallas time, on the date specified by you in the written notice given by you of
the Underwriters' election to purchase such Optional Shares, or at such other
time and date as you and the Company may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery," such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery," and each
such time and date for delivery is herein called a "Time of Delivery."
If registration of any certificate shall be requested in a name other
than that of an Underwriter, there shall be delivered to ChaseMellon Shareholder
Services, L.L.C. ("Chase Shareholder Services") a transfer application in form
acceptable to Chase Shareholder Services with respect to the person in whose
name registration of such certificate is so requested. The certificates
representing the Shares will be made available for checking and packaging at
least 24 hours prior to the Time of Delivery with respect thereto at such place
as is designated by Rauscher Pierce Refsnes, Inc.
If certificates in temporary form are issued, the Company agrees to
cause definitive certificates to be prepared as soon as practicable following
the Time of Delivery. After the preparation of definitive certificates, the
temporary certificates shall be exchangeable for definitive certificates upon
surrender of the temporary certificates, without charge to the holder
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thereof. Until so exchanged, the Company agrees that the temporary certificates
shall in all respects be entitled to the same benefits as the definitive
certificates.
6. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus
which shall be reasonably disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof, of
the time when the Registration Statement, or any amendment thereto, has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies thereof; to
advise you, promptly after it receives notice thereof, of the issuance by
the Commission of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or Prospectus, of the suspension of
the qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or suspending
any such qualification, to use promptly its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus as
amended or supplemented in such quantities as you may from time to time
reasonably request, and, if the delivery of a prospectus is required at any
time prior to the expiration of nine months after the time of the issue of
the Prospectus in connection with the offering or sale of the Shares and if
at such time either (i) any event shall have occurred as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered, not
misleading, or (ii) if for any other reason it shall be
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necessary during such same period to amend or supplement the Prospectus in
order to comply with the Act, to notify you and upon your request to prepare
and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request of
an amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue of
the Prospectus, upon your request but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as you may request of
an amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its security holders as soon as
practicable, but in any event not later than 18 months after the "effective
date of the Registration Statement" (as defined in Rule 158(c) under the
Act), an earnings statement of the Company and its subsidiaries (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule 158);
(e) (i) During the period beginning from the date hereof and
continuing to and including the date 180 days after the effective date of
the Prospectus, not to offer, sell, contract to sell or otherwise dispose of
Stock or other securities which are substantially similar to the Stock or
which are convertible into or exchangeable for Stock or other securities
which are substantially similar to the Stock, without your prior written
consent (other than pursuant to stock option plans existing on the date of
this Agreement); and (ii) that it will use its reasonable efforts to cause
each person who has entered into a Lock-up Agreement (as hereinafter
defined) to comply therewith, and will not grant any waivers or consents to
non-compliance therewith and will otherwise enforce its rights under each
such agreement, in each case unless and to the extent that it shall have
obtained your prior written consent;
(f) During a period of five years from the effective date of the
Registration Statement, to furnish to you, upon request, copies of all
reports or other communications (financial or other) furnished to
stockholders, and to deliver to you, upon request, copies of any reports and
financial statements furnished to or filed with the Commission, the Nasdaq
National Market or any national securities exchange on which any class of
securities of the Company is listed;
(g) To use the net proceeds received by it from the sales of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds" ;
12
(h) To use commercially reasonable efforts to have the Shares
accepted for quotation on the Nasdaq National Market; and
(i) To cause the Restructuring to be consummated in accordance with
applicable law and the terms of the Restructuring Documents prior to the
First Time of Delivery.
7. The Company covenants and agrees with the several Underwriters
that, except as provided below, the Company will pay or cause to be paid all
costs and expenses incident to the performance of the Company's obligations
hereunder including: (i) the fees, disbursements and expenses of the Company's
counsel and accountants in connection with the registration of the Shares under
the Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, the Blue Sky
Memorandum and any other documents in connection with the offering, purchase,
sale and delivery of the Shares; (iii) all expenses in connection with the
qualification of the Shares for offering and sale under state securities laws as
provided in Section 6(b) hereof, including the fees and disbursements of counsel
for the Underwriters in connection with such qualification and in connection
with the Blue Sky survey; (iv) all fees and expenses in connection with
including the Shares in the Nasdaq National Market; (v) the filing fees and the
fees and disbursements of counsel for the Underwriters incident to securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; (viii) the
printing of internal sales materials; and (ix) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that the
Company shall bear the cost of any other matters not directly relating to the
sale and purchase of the Shares pursuant to this Agreement and that, except as
provided in this Section, Section 9 and Section 12 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct in
all material respects (except that such phrase "in all material respects" shall
be disregarded to the extent any such representation or warranty is qualified by
"material," "material adverse change" or any similar phrase), the condition that
the Company shall have performed all of its obligations hereunder theretofore to
be performed, and the following additional conditions:
13
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
6(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) The Restructuring Documents shall have been duly authorized,
executed and delivered by the respective parties thereto, and the
Restructuring shall have been consummated in accordance with applicable law
and the terms of the Restructuring Documents;
(c) Strasburger & Price, L.L.P., counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Company, the validity of the Shares
being delivered at such Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(d) Jackson & Walker, L.L.P., counsel for the Company and Kevco Texas,
shall have furnished to you their written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Texas,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus; all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable and conform to the description of the Stock contained in
the Prospectus; and the Shares being delivered at such Time of Delivery
have been duly authorized and, upon payment and delivery in accordance
with this Agreement, will be validly issued, fully paid and non-
assessable and will conform to the description of the Stock contained in
the Prospectus;
(iii) The Company is duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction set forth in such opinion;
14
(iv) The Restructuring Documents have been duly authorized,
executed and delivered by the respective parties thereto, and such
Restructuring Documents constitute the valid and binding agreements of
the respective parties thereto enforceable against such parties in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by general equitable
principles. The Exchange has been consummated and the Merger has become
effective. The S Corporation Distribution has been duly authorized by
all necessary corporate action on the part of Kevco Texas;
(v) Each subsidiary of the Company listed on Exhibit A has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with power
and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and each subsidiary is duly
qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each jurisdiction listed across
from its name on Exhibit A under the heading Jurisdiction of Foreign
Qualification; and all of the issued shares of capital stock of each
such subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, and such shares are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims other than a security interest granted in favor of
the lenders under the Credit Agreement;
(vi) To such counsel's actual knowledge, and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries;
and, to such counsel's actual knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others except as described in the Prospectus;
(vii) This Agreement has been duly authorized, executed and
delivered by the Company and Kevco Texas and, assuming due
authorization, execution and delivery by you, is a valid and binding
agreement of the Company and Kevco Texas enforceable against the Company
and Kevco Texas in accordance with its terms, except insofar as
indemnification or contribution provisions may be limited by applicable
law, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles;
15
(viii) The issue and sale to you of the Shares being delivered at
such Time of Delivery by the Company in accordance with and upon the
terms and conditions set forth herein, the compliance by the Company
with all of the provisions of this Agreement, the consummation of the
Restructuring, the S Corporation Distribution and the payment of the S
Corporation Notes, and the consummation of the transactions contemplated
in this Agreement do not and will not (after considering waivers or
consents that have been obtained) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any Specified Document known to such counsel to which the Company
or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Articles or Certificate
of Incorporation or By-laws of the Company or any of its subsidiaries or
the violation of any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties that are
typically applicable to transactions similar to those contemplated by
this Agreement, the Restructuring or the S Corporation Distribution, as
applicable, except for such violations that would not have a material
adverse effect on the financial condition or the results of operation of
the Company and its subsidiaries considered as a whole;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement, the
consummation of the Restructuring, the S Corporation Distribution or the
payment of the S Corporation Notes, except the registration under the
Act of the Shares, such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters, and the filing of merger
certificates with the appropriate government officials with respect to
the Merger;
(x) Neither the Company nor any of its subsidiaries is (i) to the
actual knowledge of such counsel, in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any Specified Document to which it is a party or by which
it or any of its properties may be bound or (ii) in violation of any
applicable statute or any applicable order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties, except
for such violations in the case of Clause (ii) that would not have a
material adverse effect
16
on the financial condition or the results of operation of the Company
and its subsidiaries considered as a whole;
(xi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act;
(xii) To the actual knowledge of such counsel, neither the Company
nor any of its subsidiaries has received any notice of proceedings
relating to revocation or modification of any Governmental Licenses
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
financial condition or results of operations of the Company and its
subsidiaries, considered as a whole;
(xiii) The Registration Statement was declared effective under the
Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission; and
(xiv) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Act and the rules and regulations thereunder. Such counsel shall further
state that it has participated in the preparation of the Registration
Statement and the Prospectus and meetings with members of management of
the Company and its independent certified public accountants relating to
the Registration Statement and the Prospectus, and although such counsel
has not verified the accuracy or completeness of the information
contained in the Registration Statement or the Prospectus, nothing has
come to the attention of such counsel which has caused it to believe
that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were
17
made, not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading or that, as of
such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
and they do not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement or
the Prospectus which are not filed or described as required.
In rendering such opinion, (i) such counsel may state that they
express no opinion as to the laws of any jurisdiction other than the laws of
the State of Texas, the General Corporation Law of the State of Delaware,
and the federal laws of the United States and (ii) may rely as to matters of
fact upon certificates of officers of the Company and its subsidiaries,
provided that such counsel shall state that they believe that both you and
they are justified in relying upon such officers' certificates;
(e) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:00 a.m., Dallas, Texas time on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, Coopers &
Lybrand L.L.P. shall have furnished to you a letter or letters, dated the
respective date of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto;
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included
in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus and (ii) since
the respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock (other than
issuances of stock upon the exercise of stock options which were outstanding
on the date of the latest balance sheet included in the Prospectus), short-
term or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries otherwise than as
set forth or contemplated in the Prospectus, the effect of which, in any
such case described in Clause (i) or (ii), is in your reasonable judgment so
material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the
18
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof through such Time of Delivery there
shall not have occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York Stock
Exchange; (ii) a general moratorium on commercial banking activities in New
York declared by either Federal or New York authorities; or (iii) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in this Clause (iii) in your judgment
makes it impracticable or inadvisable to proceed with the public offering or
delivery of the Shares being delivered at such Time of Delivery on the terms
and in the manner contemplated by the Prospectus;
(h) The Shares to be sold by the Company at such Time of Delivery
shall have been duly accepted, subject to notice of issuance, for quotation
on the Nasdaq National Market;
(i) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and warranties
of the Company herein at and as of such Time of Delivery (it being agreed
that for purposes of any such certificate, each reference in such
representations and warranties of the Company to any subsidiary or
subsidiaries of the Company shall include Kevco Delaware, as successor by
Merger to Kevco Texas, and Sunbelt), as to the performance by the Company of
all of its obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request and the
Company shall have furnished or caused to be furnished certificates as to
the matters set forth in subsections (a) and (f) of this Section and as to
such other matters as you may reasonably request; and
(j) On or prior to the First Time of Delivery, the directors and
executive officers of the Company, and all shareholders of the Company
immediately after the Exchange (other than James W. Kimmel with respect to
4,834 shares of Stock), shall have each entered into a Lock-up Agreement (a
"Lock-up Agreement") with the Underwriters on terms satisfactory to you
pursuant to which such parties agree that, during the period beginning from
the date stated in such Lock-Up Agreements and continuing to and including
the date 180 days after the date of the Prospectus, they shall not, without
your prior written consent, offer, sell, contract to sell or otherwise
dispose of any Stock or other securities which are substantially similar to
the Stock or which are convertible into or exchangeable for Stock or other
securities which are substantially similar to the Stock (other than pursuant
to bona fide gifts to persons who agree in writing with you to be bound by
the terms of such agreement or as otherwise allowed by the terms of such
Lock-Up Agreements).
19
9. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through you expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you expressly
for use therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the threat or commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under such subsection, notify the
indemnifying party in writing of the threat or commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except
20
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. The indemnifying party may not effect
any compromise or settlement of any claim or action against an indemnified party
without the indemnified party's consent unless such compromise or settlement
releases and fully satisfies such claim or action against such indemnified
party, but if the indemnified party withholds any such required consent, the
indemnifying party's liability to indemnify the indemnified party shall be
limited to the amount for which the indemnifying party would have been liable
had the consent been obtained.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to the Shares purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this subsection
(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purposes) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other
21
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 9 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 9 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company within the meaning of the Act.
10. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within 36
hours after such default by any Underwriter you do not arrange for the purchase
of such Shares, then the Company shall be entitled to a further period of 36
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the Company
as provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the
22
number of Shares which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the Company
as provided in subsection (a) above, the aggregate number of Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
nondefaulting Underwriter or the Company, except for the expenses to be borne by
the Company and the Underwriters as provided in Section 7 hereof and the
indemnity and contribution agreements in Section 9 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
11. The respective indemnities, agreements, representations,
warranties and other statements of the Company, Kevco Texas and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any officer or director or controlling person of
the Company, or Kevco Texas or any officer or director or controlling person of
Kevco Texas, and shall survive delivery of and payment for the Shares.
12. If this Agreement shall be terminated pursuant to Section 10
hereof, the Company shall not be under any liability to any Underwriter except
as provided in Section 7 and Section 9 hereof; but, if for any other reason any
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Section 7 and Section 9 hereof.
13. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Rauscher Pierce Refsnes, Inc. on behalf of you as the
Representatives.
23
All statements, requests, notices, and agreements hereunder shall be
in writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the Representatives in care of Rauscher
Pierce Refsnes, Inc. at Cityplace, 2711 N. Haskell Avenue, Suite 2500, Dallas,
Texas 75204-2936, Facsimile No.: (214) 989-1592, Attention: Corporate Syndicate
Department; and if to the Company or Kevco Texas shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth in
the Registration Statement, or to Facsimile No.: (817) 332-2765, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 9(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex or facsimile constituting such Questionnaire, which
address will be supplied to the Company by you on request. Any such statements,
requests, notices or agreements shall take effect upon receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters and the Company and Kevco Texas and, to the extent
provided in Section 9 and Section 11 hereof, the officers and directors of the
Company and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right by virtue of this Agreement. No
purchaser of any of the Shares from any Underwriter shall be deemed a successor
or assign by reason merely of such purchase.
15. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
16. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS.
17. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
18. Kevco Texas has requested that the Restructuring be done in
connection with the public offering contemplated by this Agreement but does not
intend to effect the Restructuring until after the execution of this Agreement.
Kevco Texas will benefit directly or indirectly from the sale of Shares provided
for herein. The Underwriters are willing to enter into this Agreement and to
permit the Restructuring provided that Kevco Texas joins in this Agreement for
the purposes set forth in Section 2 of this Agreement and guarantees the payment
and performance of the Company's obligations and liabilities under this
Agreement. In consideration of the foregoing, Kevco Texas hereby irrevocably
and unconditionally guarantees the prompt payment and performance of all of the
obligations and liabilities of the Company provided for in or arising pursuant
to this Agreement, including, without limitation, the obligations and
liabilities of the
24
Company provided for in or arising pursuant to Sections 1, 3, 5, 6, 7, 9 and 12
of this Agreement.
If the foregoing is in accordance with your understanding, please sign
and return to us _____ counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters and
the Company and Kevco Texas. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company for examination, upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
KEVCO, INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
KEVCO TEXAS, INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
Accepted as of the date hereof:
RAUSCHER PIERCE REFSNES, INC.
OPPENHEIMER & CO., INC.
By:
----------------------------------
(Rauscher Pierce Refsnes, Inc.)
On behalf of each of the Underwriters
25
SCHEDULE I
NUMBER OF
OPTIONAL
TOTAL SHARES TO BE
NUMBER OF PURCHASED IF
FIRM MAXIMUM
SHARES TO BE OPTION
UNDERWRITER PURCHASED EXERCISED
- ----------- --------- ---------
Rauscher Pierce Refsnes, Inc. ...
Oppenheimer & Co., Inc. .........
[NAMES OF OTHER UNDERWRITERS]....
Total ..................... 2,100,000 315,000
========= =======
I-1
ANNEX I
Pursuant to Section 8(e) of the Underwriting Agreement, Coopers &
Lybrand L.L.P. shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited (and, if applicable, prospective
financial statements and/or pro forma financial information examined) by
them and included in the Prospectus or the Registration Statement comply as
to form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations thereunder; and,
if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, prospective financial statements
and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter;
(iii) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial statements of
the Company and its subsidiaries, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited financial
statements included in the Prospectus, inquiries of officials of the Company
and its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) any unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows as of dates or
for periods beginning after December 31, 1994, included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations thereunder, or are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with the basis for the audited consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus;
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(B) any other unaudited income statement data and balance sheet
items for the periods or as of the dates referred to in Clause (A) above
included in the Prospectus do not agree with the corresponding items in
the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements as of dates or for periods beginning after December
31, 1994, and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for the
audited consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts in
the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options which were outstanding on the date of the latest financial
statements included in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or net assets or other
items specified by the representatives of the Underwriters (the
"Representatives") or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in the
latest balance sheet included in the Prospectus; except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to
in Clause (E) there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as compared
with the comparable period of the preceding year and with any other
period of corresponding length specified by the Representatives, except
AI-2
in each case for decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in such letter; and
(iv) In addition to the audit referred to in their report included in
the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraph (iii) above, they
have carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records of
the Company and its subsidiaries or other specified materials, which appear
in the Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries or other specified
materials and have found them to be in agreement.
AI-3
EXHIBIT A
CORPORATE JURISDICTION OF JURISDICTION OF
SUBSIDIARIES INCORPORATION FOREIGN QUALIFICATION
- -------------------------- --------------- ---------------------
1) Kevco Delaware, Inc. Delaware Alabama
Arizona
California
Colorado
Florida
Georgia
Idaho
Indiana
Kansas
Minnesota
North Carolina
Oregon
Pennsylvania
Tennessee
Texas
2) Sunbelt Wood Components,
Inc. Delaware Alabama
Georgia
Texas
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