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EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of December 23, 1998 (this
"Agreement"), is made by and among Wingate Partners II, L.P., a Delaware
limited partnership ("Purchaser"), and Jerry E. Kimmel (the "Shareholder"), who
is a shareholder of Kevco, Inc., a Texas corporation (the "Company"), and
solely for purposes of Articles XI and XII the Company. Unless otherwise
indicated, capitalized terms used herein are used as defined in Section 1.1.
W I T N E S S E T H
WHEREAS, the Company is engaged in the business of wholesale
distribution and manufacturing of building products to the manufactured housing
and recreational vehicle industries;
WHEREAS, the Shareholder is the owner of at least 3,700,000 shares of
common stock, par value $0.01 per share, of the Company ("Stock");
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Shareholder desires to sell 1,103,448 shares of Stock (the "Shares")
to Purchaser, and Purchaser desires to purchase and acquire from the
Shareholder the Shares;
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Shareholder desires to grant a warrant in the form attached hereto
as Exhibit A (the "Warrant") to purchase 220,690 shares of Stock (the "Warrant
Shares") to Purchaser, and Purchaser desires to purchase and acquire from the
Shareholder the Warrant; and
WHEREAS, Purchaser is unwilling to enter into this Agreement, unless
contemporaneously with the execution and delivery of this Agreement, the
Company enters into a separate stock purchase agreement with Purchaser (the
"Company Agreement"), pursuant to which the Company would, among other things,
(i) sell certain shares of Stock to Purchaser, (ii) sell the Nonvoting Shares
(as defined in the Company Agreement) to Purchaser, and (iii) grant the
Nonvoting Warrant (as defined in the Company Agreement) to purchase the
Nonvoting Warrant Shares (as defined in the Company Agreement) to Purchaser,
all upon the terms and subject to the conditions set forth in the Company
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, and agreements hereinafter set forth,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions.
Except as otherwise provided in this Agreement the following
terms shall have the meanings assigned to them in this Section 1.1.
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"Affiliate" means, as to any Person, any Person which, directly
or indirectly, controls, is controlled by, or is under common control with,
such Person. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" has the meaning provided therefor in the preamble
hereof.
"Board of Directors" means the board of directors of the Company.
"Business Combination" means any transaction constituting a
"business combination" for purposes of the TBCA Business Combination Provisions
or Article Nine of the Charter.
"Certificates" has the meaning provided therefor in Section
4.3(c).
"Charter" means the Articles of Incorporation of the Company.
"Closing" has the meaning provided therefor in Section 3.1.
"Closing Date" has the meaning provided therefor in Section 3.1.
"Commission" means the U.S. Securities and Exchange Commission.
"Company" has the meaning provided therefor in the preamble
hereof.
"Company Agreement" has the meaning provided therefor in the
recitals hereto.
"Confidentiality Agreement" has the meaning provided therefor in
Section 7.1.
"Demand Registration" has the meaning provided therefor in
Section 12.1(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, or local, or any agency or instrumentality thereof, or any court or
arbitrator (public or private).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" has the meaning provided therefor in Section
10.1.
"Indemnifying Party" has the meaning provided therefor in Section
10.1.
"Inspectors" has the meaning provided therefor in Section
12.4(a)(v).
"Law" means any federal, state, or local law (including common
law), statute, code, ordinance, rule, regulation, or other requirement.
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"Legal Proceeding" means any judicial, administrative, or
arbitral action, suit, proceeding (public or private), claim, or governmental
proceeding.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement, or
other real estate declaration, covenant, condition, restriction or servitude,
transfer restriction under any shareholder or similar agreement, third party
right or agreement to vote, encumbrance, or any other restriction or limitation
whatsoever.
"Losses" has the meaning provided therefor in Section 10.1(a).
"Managing Underwriter" has the meaning provided therefor in
Section 12.2(a).
"NASD" means the National Association of Securities Dealers, Inc.
"NASD Confirmation" means confirmation by the NASD that the
issuance of the Shares may be undertaken without prior approval of the
Company's shareholders under the NASD rules.
"Notice Date" has the meaning provided therefor in Section
11.1(a).
"Notice of Offer" has the meaning provided therefor in Section
11.1(a).
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body, or other entity.
"Public Equity Offering" means an underwritten public offering of
shares of Stock pursuant to an effective registration statement under the
Securities Act or comparable Law of any other jurisdiction.
"Purchase Price" has the meaning provided therefor in Section
2.2.
"Purchaser" has the meaning provided therefor in the preamble
hereof.
"Purchaser Documents" has the meaning provided therefor in
Section 5.2(a).
"Records" has the meaning provided therefor in Section
12.4(a)(v).
"Registrable Shares" means shares of Stock owned on the date
hereof by the Shareholder or his Affiliates and all other shares of Stock
acquired from time to time by the Shareholder or his Affiliates and any
securities issued or issuable with respect to any such shares of Stock by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, reorganization, Business Combination,
or otherwise. As to any particular Registrable Shares, such securities shall
cease to be Registrable Shares when (i) a registration statement with respect
to the sale of such securities shall have become effective under the Securities
Act (or under the applicable Laws of the relevant jurisdiction) and such
securities shall have been disposed of in accordance with the plan of
distribution set forth in such registration statement, (ii) such securities
shall have been distributed in accordance with Rule 144 of the Securities Act,
or (iii) such securities shall have been otherwise transferred, new
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certificates therefor not bearing a legend restricting further transfer shall
have been delivered in exchange therefor by the Company and subsequent
disposition of such shares shall not require registration or qualification
under the Securities Act or any other applicable Law.
"registration statement" has the meaning provided therefor in
Section 12.1(a).
"Securities" means the Shares and the Warrant (including the
Shares transferable upon the exercise of the Warrant).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller Documents" has the meaning provided therefor in Section
4.1(a).
"Shareholder" has the meaning provided therefor in the preamble
hereof.
"Shares" has the meaning provided therefor in the recitals
hereto.
"Stock" has the meaning provided therefor in the recitals hereto.
"Subsidiary" means any Person of which the Company owns, directly
or indirectly, greater than 50% of the voting securities generally entitled to
vote to elect the board of directors (or any equivalent body).
"TBCA" means the Texas Business Corporation Act, as the same may
be amended from time to time.
"TBCA Business Combination Provisions" means Part Thirteen,
Articles 13.01 through 13.08, inclusive, of the TBCA.
"Warrant" has the meaning provided therefor in the recitals
hereto.
"Warrant Shares" has the meaning provided therefor in the
recitals hereto.
ARTICLE II
SALE AND PURCHASE OF THE SHARES AND WARRANT
2.1. Sale and Purchase of the Shares and Warrant. In reliance upon the
representations, warranties, covenants, and agreements contained herein and
upon the terms and subject to the conditions hereinafter set forth, at the
Closing, the Shareholder shall sell, assign, transfer, convey, and deliver to
Purchaser, and Purchaser shall purchase and acquire from the Shareholder, all
of the right, title, and interest of the Shareholder in and to the Shares and
Warrant.
2.2. Amount and Form of Consideration. The consideration to be paid by
Purchaser to the Shareholder in consideration of the Shares and the Warrant
shall be an aggregate amount in cash equal to U.S. $8,000,000 (the "Purchase
Price").
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ARTICLE III
THE CLOSING
3.1. Closing Date. Except as hereinafter provided, the closing
hereunder (the "Closing") shall take place at the offices of Weil, Gotshal &
Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas 75201, on the first
business day following the date on which all of the conditions contained in
Articles VIII and IX have been satisfied or waived, as applicable, or at such
other place and at such other time and date as may be mutually agreed upon by
Purchaser and the Shareholder. The date of the Closing is referred to herein as
the "Closing Date."
3.2. Proceedings at Closing. All proceedings to be taken and all
documents to be executed and delivered by the Shareholder in connection with
the consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Purchaser and its counsel, and all
proceedings to be taken and all documents to be executed and delivered by
Purchaser in connection with the consummation of the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to the
Shareholder and his counsel. All proceedings to be taken and all documents to
be executed and delivered by all parties at the Closing shall be deemed to have
been taken and executed simultaneously, and no proceedings shall be deemed
taken nor any documents executed or delivered until all have been taken,
executed, and delivered.
3.3. Deliveries by the Shareholder to Purchaser. At the Closing, the
Shareholder shall deliver, or shall cause to be delivered, to Purchaser (i)
Certificates representing the number of Shares to be purchased by Purchaser,
duly endorsed in blank or accompanied by stock powers duly endorsed in blank,
in proper form for transfer and (ii) the Warrant, duly executed.
3.4. Deliveries by Purchaser to the Shareholder. At the Closing,
Purchaser shall deliver to the Shareholder a confirmation of the wire transfer
of immediately available funds in an amount equal to the Purchase Price to an
account or accounts specified by the Shareholder to Purchaser prior to the
Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to Purchaser as of the
date hereof as follows:
4.1. Authorization; Enforceability.
(a) The Shareholder has the legal capacity to execute and deliver
this Agreement and each other agreement, document, instrument, or certificate
contemplated by this Agreement or to be executed by the Shareholder in
connection with the consummation of the transactions contemplated by this
Agreement (all such other agreements, documents, instruments, and certificates
required to be executed by the Shareholder being hereinafter referred to,
collectively, as the "Seller Documents"), and to perform fully his obligations
hereunder and thereunder.
(b) The Shareholder has, and at the time of the exercise of the
Warrant will have, the power to sell, transfer, convey, and deliver to
Purchaser, in accordance with the terms
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of this Agreement and the Warrant, good and valid title, beneficially and of
record, to the Shares to be purchased hereunder and the Warrant Shares to be
purchased upon exercise of the Warrant, free and clear of any and all Liens.
(c) This Agreement has been, and each of the Seller Documents
will be, on or prior to the Closing Date, duly executed and delivered by the
Shareholder and (assuming the due authorization, execution, and delivery by the
other parties hereto and thereto) this Agreement constitutes, and each of the
Seller Documents when so executed and delivered will constitute, the legal,
valid, and binding obligation of the Shareholder, enforceable against him in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, and similar Laws affecting creditors' rights
generally and to general principles of equity (whether considered in a
proceeding in equity or at law).
4.2. Consents of Third Parties. No consent, waiver, approval, or
authorization of, or declaration or filing with, or notification to, any Person
is required on the part of the Shareholder in connection with the Shareholder's
execution and delivery of this Agreement or the Seller Documents, the
consummation by the Shareholder of the transactions contemplated hereby and
thereby, or the compliance by the Shareholder with any of the provisions hereof
or thereof, except for compliance with the applicable requirements of the
Exchange Act.
4.3. Stock.
(a) The Shareholder owns the Shares and the Warrant Shares, and
at the time of the exercise of the Warrant will own the Warrant Shares to be
purchased upon exercise of the Warrant, free and clear of any and all Liens,
and none of such Shares or Warrant Shares is, or in the case of the Warrant
Shares will be at the time of the exercise of the Warrant, subject to any
option, warrant, right of conversion, exchange or purchase, or any similar
right other than as provided for herein.
(b) The Shareholder is not, and with respect to the Warrant
Shares will not be at the time of the exercise of the Warrant, party to any
agreements or understandings with respect to the voting, sale, or transfer of
any of the portion of the Shares to be purchased hereunder or the Warrant
Shares to be purchased upon exercise of the Warrant.
(c) The delivery by the Shareholder to Purchaser at the Closing,
and at the time of the exercise of the Warrant, as the case may be, of
certificates representing the Shares to be purchased hereunder or the Warrant
Shares to be purchased upon exercise of the Warrant ("Certificates") duly
endorsed in blank or accompanied by stock powers endorsed in blank will vest
Purchaser on the Closing Date, or at the time of the exercise of the Warrant,
as the case may be, with good title to the Shares to be purchased hereunder and
the Warrant Shares to be purchased upon exercise of the Warrant, free and clear
of any and all Liens whatsoever, except those Liens created, imposed, or
granted by Purchaser.
4.4. Litigation. As of the date of this Agreement, there is no Legal
Proceeding pending, or to the knowledge of the Shareholder, threatened against
Shareholder that questions the validity of this Agreement or any action to be
taken by the Shareholder in connection with this Agreement.
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4.5. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Shareholder
directly with Purchaser, without the intervention of any Person on behalf of
the Shareholder in such manner as to give rise to any valid claim by any Person
against Purchaser, the Company, or any Subsidiary for a finder's fee, brokerage
commission, or similar payment.
4.6. Disclaimer. Except for the representation and warranties set forth
in this Article IV, the Shareholder makes no other representations or warranties
of any kind or character, expressed, implied, or statutory, in respect of the
Shareholder. All such other representations and warranties are disclaimed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Shareholder as of the
date hereof as follows:
5.1. Organization and Good Standing. Purchaser is a limited
partnership, duly organized, validly existing, and in good standing under the
laws of its state of organization.
5.2. Authorization; Enforceability.
(a) Purchaser has the power to execute and deliver this Agreement
and each other agreement, document, instrument, or certificate contemplated by
this Agreement or to be executed by Purchaser in connection with the
consummation of the transactions contemplated hereby and thereby (all of such
agreements, documents, instruments, and certificates required to be executed by
Purchaser being hereinafter referred to, collectively, as the "Purchaser
Documents"), and to perform fully its obligations hereunder and thereunder.
(b) The execution, delivery, and performance by Purchaser of this
Agreement and each of the Purchaser Documents has been duly authorized by all
necessary partnership or other action on the part of Purchaser.
(c) This Agreement has been, and each of the Purchaser Documents
will be, on or prior to the Closing Date, duly executed and delivered by
Purchaser and (assuming the due authorization, execution, and delivery by the
other parties hereto) this Agreement constitutes, and each of the Purchaser
Documents when so executed and delivered will constitute, the legal, valid, and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, and similar Laws affecting creditors' rights generally
and to general principles of equity (whether considered in a proceeding in
equity or at law).
5.3. Consents of Third Parties. No consent, waiver, approval, or
authorization of, or declaration or filing with, or notification to, any Person
is required on the part of Purchaser in connection with the execution and
delivery of this Agreement or the Purchaser Documents, the consummation by
Purchaser of the transactions contemplated hereby and thereby, or the
compliance by Purchaser with any of the provisions hereof or thereof except for
compliance with the applicable requirements of the Exchange Act. The execution
and delivery by Purchaser of this Agreement and the Purchaser Documents, the
consummation by Purchaser of the
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transactions contemplated hereby and thereby, and the compliance by Purchaser
with any of the provisions hereof or thereof will not conflict with, or result
in the breach of, any provision of the certificate of limited partnership or
limited partnership agreement or other organizational documents of Purchaser.
5.4. Litigation. There is no Legal Proceeding pending, or to the
knowledge of Purchaser, threatened against Purchaser that questions the
validity of this Agreement or any action to be taken by Purchaser in connection
with this Agreement.
5.5. Brokers. Except for such Persons who will be paid a finder's fee,
brokerage commission, or similar payment at the Closing, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by Purchaser directly with the Shareholder, without the
intervention of any Person on behalf of Purchaser or its Affiliates in such
manner as to give rise to any valid claim by any Person against Purchaser, the
Company, any Subsidiary, the Shareholder, or any of their Affiliates for a
finder's fee, brokerage commission, or similar payment.
5.6. Securities Matters.
(a) Purchaser understands and acknowledges that the Securities
have not been registered under the Securities Act, or the securities laws of
any state or foreign jurisdiction and, unless so registered, may not be
offered, sold, transferred, or otherwise disposed of except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any applicable securities laws of any
state or foreign jurisdiction.
(b) Purchaser is an "accredited investor" (as defined in Rule
501(a) of Regulation D under the Securities Act).
(c) Purchaser (i) has knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
purchasing the Securities, (ii) is able to bear the economic risk of an
investment in the Securities for an indefinite period of time, including the
risk of a complete loss of any such investment, and (iii) acknowledges that the
information publicly disclosed by the Company or contained in written materials
furnished to Purchaser indicates that the expected earnings of the Company for
the fourth calendar quarter of 1998 will be substantially below estimates
previously made by the Company.
(d) Purchaser is acquiring the Securities for its own account for
investment purposes and not with a view to, or for offer or sale for the
Shareholder in connection with, the distribution or resale thereof.
(e) Purchaser understands and agrees that the Securities are
being sold in a transaction not involving any public offering within the
meaning of the Securities Act, and that the Securities may not be offered,
sold, or otherwise transferred to, or for the account or benefit of, any Person
except as permitted in the following sentence. Purchaser agrees, on its own
behalf and on behalf of any accounts for which Purchaser is acting, that if
Purchaser should sell or otherwise transfer any Securities, it will do so only
(i) pursuant to an exemption from the registration requirements of the
Securities Act (if available) or if the Securities Act does not apply or (ii)
pursuant to an effective registration statement under the Securities Act, and
Purchaser further agrees to provide to any Person purchasing any of the
Securities from it a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
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(f) The Purchaser understands that the Securities purchased
pursuant to this Agreement will be in unregistered form only and that any
certificates delivered to it in respect of the Securities will bear a legend
substantially to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED AS OF
DECEMBER 23, 1998, AMONG JERRY E. KIMMEL, WINGATE PARTNERS
II, L.P., AND FOR THE PURPOSES OF ARTICLES XI AND XII THEREOF
KEVCO, INC. SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
5.7. Financing. Purchaser has available to it, and on the Closing Date
will have, all funds necessary to consummate the transactions contemplated by
this Agreement, including, without limitation, the payment of the Purchase
Price to the Shareholder.
ARTICLE VI
COVENANTS OF THE SHAREHOLDER
6.1. Public Statements. From and after the date hereof and until the
Closing, the Shareholder hereby covenants and agrees that before the
Shareholder shall release any information concerning this Agreement or the
transactions contemplated hereby and which is intended for or may result in
public dissemination thereof, the Shareholder shall so advise and cooperate
with Purchaser and shall not release such information without Purchaser's
consent (which consent shall not be unreasonably withheld), unless such
information is otherwise publicly available or the release thereof is required
by Law.
6.2. Consents and Conditions. From and after the date hereof and until
the Closing, the Shareholder hereby covenants and agrees that the Shareholder
will use his commercially reasonable efforts (a) to obtain any required
governmental consents to the transactions contemplated hereby required to be so
obtained by him, and (b) to cause each of the conditions precedent set forth in
Article VIII or IX to be satisfied.
6.3. No Shop Provision. Except as provided for in this Agreement from
and after the date hereof until the earlier of the Closing Date or the date on
which this Agreement shall have been terminated in accordance with the
provisions of Article XIII, the Shareholder will not and, will cause his family
members not to, and will use his commercially reasonable efforts to cause his
agents and representatives not to, authorize or permit any investment banker,
attorney, accountant, or other representative retained by any of the foregoing
in any manner, directly or
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indirectly, to (a) effect or seek, or offer (including by way of furnishing
information) or propose (whether publicly or otherwise) to effect, (i) any
sale, assignment, transfer, conveyance, or delivery of any of the Shares,
Warrant Shares, or other shares of capital stock of the Company or securities
convertible into or exercisable for capital stock other than issuance pursuant
to the exercise of options outstanding on the date hereof and listed in Section
4.2 of the Disclosure Schedule to the Company Agreement; (ii) any tender or
exchange offer or merger or other business combination or sale of a substantial
portion of assets involving the Company or any of its Subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution, or other
extraordinary transaction with respect to the Company or any of its
Subsidiaries; or (iv) any solicitation of proxies (as such terms are used in
the proxy rules of the Commission) or consents to vote any shares of the
Company's capital stock except as required by the Company Agreement, or (b)
enter into any discussions or arrangements with any third party (or provide any
information to any third party) with respect to any of the foregoing.
6.4. Further Actions. From time to time after the Closing Date, the
Shareholder agrees to execute and deliver such instruments and take such other
actions as may reasonably be required to carry out the intent of this Agreement
and to consummate the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF PURCHASER
7.1. Confidentiality. Except as otherwise permitted by the Board of
Directors (or any committee thereof) or as contemplated hereby or as provided
in Section 7.1 of the Company Agreement, from and after the date hereof and
until the Closing, Purchaser hereby covenants and agrees that it will treat as
confidential, keep secret and not use in the course of its business any
Evaluation Material (as defined in the letter agreement dated July 1998 by and
between Purchaser and Donaldson, Lufkin & Jenrette Securities Corporation, on
behalf of the Company (the "Confidentiality Agreement")), and that the
Evaluation Material shall be held in the strictest confidence by Purchaser in
accordance with, and pursuant to, the Confidentiality Agreement and, in the
event that the transactions contemplated hereby are not consummated, shall be
returned or destroyed in accordance with, and pursuant to, the Confidentiality
Agreement.
7.2. Public Statements. From and after the date hereof and until the
Closing, Purchaser hereby covenants and agrees that before it shall release any
information concerning this Agreement or the transactions contemplated hereby
and which is intended for public dissemination thereof, Purchaser shall so
advise and cooperate with the Shareholder and shall not release such
information without the Shareholder's consent (which consent shall not be
unreasonably withheld), unless such information is otherwise publicly available
or the release thereof is required by Law.
7.3. Consents and Conditions. From and after the date hereof and until
the Closing, Purchaser hereby covenants and agrees that Purchaser will (a)
cooperate in all respects with the Shareholder and the Company (including,
without limitation, by providing all necessary information concerning Purchaser
for disclosure) in connection with any filing by the Company pursuant to the
requirements, if applicable, of Rule 14f-1 under the Exchange Act and (b) use
its commercially reasonable efforts (i) to obtain any required governmental
consents to the transactions contemplated hereby required to be obtained by it
and (ii) to cause each of the conditions precedent set forth in Article VIII or
IX to be satisfied.
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7.4. Certain Information. In the event that the Company is not subject
to Section 13 or 15(d) of the Exchange Act, Purchaser shall, and shall cause
its Affiliates to, use their respective commercially reasonable efforts to
cause the Company to provide any information reasonably requested by the
Shareholder concerning the Company (including financial statements) in order to
permit the Shareholder or his Affiliates to comply with the requirements of
Rule 144(c)(2) and Rule 144A(d)(4) under the Securities Act in connection with
any sale or transfer of any or all shares of Stock owned by the Shareholder or
his Affiliates from time to time pursuant to Rule 144 and Rule 144A,
respectively, under the Securities Act.
7.5. Further Actions. From time to time after the Closing Date,
Purchaser agrees to execute and deliver such instruments and take such other
actions as may reasonably be required to carry out the intent of this Agreement
and to consummate the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction or
waiver by Purchaser of the following conditions(provided, however, that in the
event the Company Agreement has previously been terminated pursuant to Section
12.1(f) thereof, the conditions set forth in Sections 8.5, 8.6, 8.8 and 8.9
below, shall be deemed to have been satisfied):
8.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of the Shareholder contained herein shall be
true and correct on and as of the Closing Date with the same force and effect
as though the same had been made on and as of the Closing Date, other than such
representations and warranties as are made of another date.
8.2. Performance of Covenants. The Shareholder shall have performed
and complied, in all material respects, with the covenants and provisions of
this Agreement required to be performed or complied with by him between the
date hereof and the Closing Date.
8.3. Hart-Scott-Rodino. All applicable waiting periods, if any, in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
8.4. Litigation; Other Events.
(a) No preliminary or permanent injunction or other order of any
court restraining or prohibiting the consummation of the transactions
contemplated hereby shall be in effect.
(b) There shall not be pending, nor shall there have been
threatened, any inquiry by a Governmental Body or Legal Proceeding that seeks,
nor any Law that would have the effect, to:
(i) challenge, restrain, prohibit, or delay the sale or
purchase of the Shares or the Warrant Shares pursuant to this
Agreement or any of the transactions contemplated hereby or obtain
damages as a result thereof;
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(ii) make the sale or purchase of the Shares or the Warrant
Shares pursuant to this Agreement illegal or in violation of any duty;
(iii) impose or result in material limitations on the ability
of Purchaser or any of its respective Affiliates to exercise full
rights of ownership of the Shares or the Warrant Shares purchased by
it hereunder, including, without limitation, the right to vote such
portion of the Shares or the Warrant Shares purchased by it hereunder
on all matters properly presented to the shareholders of the Company;
or
(iv) impose upon Purchaser, directly or indirectly, the
restraints or conditions set forth in the TBCA Business Combination
Provisions or in Article Nine of the Charter or similar restraints or
conditions.
8.5. Board Approval. The purchase of each of the Shares and the
Warrant Shares by Purchaser shall have been approved (which approval shall not
have been withdrawn or modified) by the Board of Directors (or the Special
Committee (as defined in the Company Agreement)) for purposes of Article Nine
of the Charter and the TCBA Business Combination Provisions, and resolutions to
such effect certified by an authorized officer of the Company shall have been
delivered to Purchaser.
8.6. Company Agreement. The Closing (as defined in the Company
Agreement) shall have occurred concurrently with the Closing.
8.7. Warrant. The Shareholder shall have delivered to Purchaser a duly
executed copy of the Warrant in the form attached hereto as Exhibit A.
8.8. Termination of Employment Agreement. The Employment Agreement
dated October 1, 1996, between the Company and the Shareholder shall have been
terminated and cease to have any force and effect.
8.9. Confirmation by the NASD. The Company shall have received the
NASD Confirmation.
ARTICLE IX
CONDITIONS PRECEDENT TO THE SHAREHOLDER'S OBLIGATIONS
The obligation of the Shareholder to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction or
waiver by the Shareholder of the following conditions (provided, however, that
in the event the Company Agreement has previously been terminated pursuant to
Section 12.1(f) thereof, the conditions set forth in Sections 9.6 and 9.7
below, shall be deemed to have been satisfied):
9.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of Purchaser contained herein shall be true and
correct as of the Closing Date with the same force and effect as though the
same had been made on and as of the Closing Date.
9.2. Performance of Covenants. Purchaser shall have performed and
complied, in all material respects, with the covenants and provisions in this
Agreement required herein to be performed or complied with by it between the
date hereof and the Closing Date.
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9.3. Litigation; Other Events.
(a) No preliminary or permanent injunction or other order of any
court restraining or prohibiting the consummation of the transactions
contemplated hereby shall be in effect.
(b) There shall not be pending, nor shall there have been
threatened, any inquiry by a Governmental Body or Legal Proceeding that seeks,
nor any Law that would have the effect, to:
(i) challenge, restrain, prohibit, or delay the sale and
purchase of the Shares or the Warrant Shares pursuant to this
Agreement or any of the transactions contemplated hereby or obtain
damages as a result thereof;
(ii) make the sale or purchase of the Shares or the Warrant
Shares pursuant to this Agreement illegal or in violation of any duty;
(iii) impose or result in material limitations on the ability
of Purchaser or any of its Affiliates to exercise full rights of
ownership of the portion of the Shares or the Warrant Shares purchased
by it hereunder, including, without limitation, the right to vote such
portion of the Shares or the Warrant Shares purchased by it hereunder
on all matters properly presented to the shareholders of the Company;
or
(iv) impose upon Purchaser or the Company, directly or
indirectly, the restraints or conditions set forth in the TBCA
Business Combinations Provisions or in Article Nine of the Charter or
similar restraints or conditions.
9.4. Hart-Scott-Rodino. All applicable waiting periods, if any, in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
9.5. Purchase Price. Purchaser shall have simultaneously paid, in
accordance with the terms hereof, the Purchase Price.
9.6. Consulting Agreement. The Company and the Shareholder shall have
entered into a consulting agreement in the form attached hereto as Exhibit B.
9.7. Confirmation by the NASD. The Company shall have received the
NASD Confirmation.
9.8. Company Agreement. Either the Closing (as defined in the Company
Agreement) shall have occurred concurrently with the Closing or, in the event
the Company Agreement has previously been terminated pursuant to Section
12.1(f) thereof, the transaction provided for in the definitive agreement or
other documents giving rise to such termination of the Company Agreement shall
have been consummated.
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ARTICLE X
INDEMNIFICATION AND RELATED MATTERS
10.1. Indemnification.
(a) The Shareholder hereby agrees to indemnify and hold
Purchaser, its Affiliates and the officers, directors, employees, and agents
thereof, harmless (on an after-tax basis) from and against any and all claims,
judgments, causes of action, liabilities, obligations, damages, losses,
deficiencies, costs, penalties, interest, and expenses (including, without
limitation, the reasonable fees and expenses of counsel) (collectively,
"Losses") arising out of, based upon, attributable to, or resulting from:
(i) any inaccuracy of any representation, any breach of
warranty or nonfulfillment of any agreement or covenant on the part of
the Shareholder contained in this Agreement or any Seller Document;
and
(ii) all claims, actions, suits, proceedings, investigations,
demands, and assessments incident to any of the foregoing.
(b) Purchaser hereby agrees to indemnify and hold the Shareholder
harmless (on an after-tax basis) from and against any and all Losses arising out
of, based upon, attributable to, or resulting from:
(i) any inaccuracy of any representation, any breach of
warranty or nonfulfillment of any agreement or covenant on the part of
Purchaser contained in this Agreement or any Purchaser Document; and
(ii) all claims, actions, suits, proceedings, investigations,
demands, and assessments incident to the foregoing.
Notwithstanding the foregoing provisions of Section 10.1(a)(ii) or
(b)(ii), the party entitled to indemnification ( the "Indemnified Party") shall
not be entitled to any claims for fees and expensed of counsel in respect of
any action, suit, or proceeding by the party from which indemnification is
sought (the "Indemnifying Party"), unless and until such action, suit, or
proceeding has been determined by a final, nonappealable order or judgment of a
court of competent jurisdiction in favor of such Indemnified Party.
10.2. Procedures for Indemnification. Whenever a claim shall arise for
indemnification under Section 10.1, with the exception of claims for litigation
expenses in respect of litigation as to which a notice of claim, as provided in
this Section 10.2, has previously been given, which expenses shall be funded on
an ongoing basis, the Indemnified Party shall promptly notify Indemnifying
Party of such claim and, when known, the facts constituting the basis for such
claim; provided, however, that in the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceeding by
a third party, the Indemnified Party shall give such notice thereof to the
Indemnifying Party not later than ten business days prior to the time any
response to the asserted claim is required, if possible, and in any event
within five business days following receipt of notice thereof. Failure to give
timely notice or to include any specified information in any notice required by
this Section 10.2 will not effect the rights or obligations of any party
hereunder except and only to the extent that, as a result
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of such failure, any party which was entitled to receive such notice was
deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise damaged as a result of such failure. In the event of
any such claim for indemnification resulting from or in connection with a claim
or legal proceeding by a third party, the Indemnifying Party may, at its sole
cost and expense, assume the defense thereof using counsel who is reasonably
satisfactory to the Indemnified Party; provided, however, that the Indemnifying
Party shall first have agreed in writing that it does not and will not contest
its responsibility for indemnifying the Indemnified Party in respect of Losses
attributable to such claim or proceeding; and provided, however, that if the
defendants in any such actions include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be legal defenses or rights available to it which have not been
waived and are in actual or potential conflict with those available to the
Indemnifying Party, the Indemnified Party shall have the right to select one
law firm to act as separate counsel, on behalf of such Indemnified Party, at
the expense of the Indemnifying Party. Subject to the second proviso of the
immediately preceding sentence, if an Indemnifying Party assumes the defense of
any such claim or legal proceeding, the Indemnifying Party shall be entitled to
select counsel and take all steps necessary in the defense thereof; provided,
however, that no settlement shall be made without the prior written consent of
the Indemnified Party, which consent shall not be unreasonably withheld (and if
the Indemnified Party shall withhold its consent to any monetary settlement
proposed by the Indemnifying Party and which the other party to the action has
indicated it is prepared to accept, the Indemnified Party shall in no event be
deemed for purposes of this Agreement to have suffered Losses in connection
with such claim or proceeding in excess of the proposed amount of such
settlement); and provided, further, that subject to the second proviso of the
immediately preceding sentence, the Indemnified Party may, at its own expense,
participate in any such proceeding with the counsel of its choice without any
right of control thereof. So long as the Indemnifying Party is in good faith
defending such claim or proceeding, the Indemnified Party shall not compromise
or settle such claim without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. If the Indemnifying
Party does not assume the defense of any such claim or litigation in accordance
with the terms hereof, the Indemnified Party may defend against such claim or
litigation in such manner as it may deem appropriate, including, without
limitation, settling such claim or litigation (after giving prior written
notice of the same to the Indemnifying Party and obtaining the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld) on such terms as the Indemnified Party may deem appropriate, and the
Indemnifying Party will promptly indemnify the Indemnified Party in accordance
with the provisions of this Section 10.2. Notwithstanding the foregoing, at any
time after the Indemnifying Party has failed to discharge its liability for
legal and other expenses pursuant to this Section 10.2, which failure shall not
have been cured, or at any time the Indemnifying Party is subject to a
bankruptcy case pursuant to Chapter 7 or Chapter 11 of the U.S. Bankruptcy
Code, if the Indemnified Party shall propose to settle a claim as to which it
intends to seek indemnity, it shall provide the Indemnifying Party with 21
days' written notice of such proposed settlement, and the Indemnifying Party
shall, within such period either (i) consent to the terms of the proposed
settlement or (ii) provide the Indemnified Party with (A) a written notice of
objection to the proposed settlement, with a statement of reason, (B)
reasonable evidence that the financial condition of the Indemnifying Party is
sufficient to permit it to pay a judgment for the full amount being sought by
the third party claimant (or, at the Indemnified Party's request, a letter of
credit in such amount) and (C) an undertaking to satisfy any such judgment.
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ARTICLE XI
RIGHT OF FIRST OFFER AND REIMBURSEMENT
11.1. Right of First Offer.
(a) If at any time after the Closing Date, the Shareholder
desires to transfer all or a portion of the shares of Stock owned by him to a
third party (other than an Affiliate or family member of the Shareholder and
other than as provided in the Warrant), the Shareholder shall give prompt
written notice (a "Notice of Offer") to the Company of his intent to transfer
the Stock, which notice shall contain the proposed sale price for the shares of
Stock being offered and the number of shares of Stock which the Shareholder
proposes to transfer and any other material term or condition of the proposed
transfer. The date on which such notice is sent to the Company is referred to
hereinafter as the "Notice Date." The Notice of Offer shall be deemed an
irrevocable offer to sell to the Company (or any Person designated by the
Company) such shares of Stock on the terms and conditions set forth in the
Notice of Offer. The Company shall have 15 days following the Notice Date to
notify in writing the Shareholder of its election to purchase all, but not less
than all, of such shares of Stock (or to have all, but not less than all, of
such shares of Stock purchased by its designees). If the Company notifies the
Shareholder of its election to purchase such shares of Stock, the closing for
such transaction shall take place no later than 30 days from the Notice Date.
If the Shareholder does not receive such written notice from the Company within
the 15-day period, the Company shall be deemed to have declined to purchase
such shares of Stock and the Shareholder may transfer such shares of Stock to
any third parties at not less than the sale price and upon the other terms and
conditions set forth in the Notice of Offer; provided, however, that if the
Shareholder does not complete the contemplated sale within 180 days of the
Notice Date, the provisions of this Section 11.1(a) shall again apply.
(b) Notwithstanding anything herein to the contrary, the terms
and conditions of Section 11.1(a) do not apply to transfers made by the
Shareholder (i) pursuant to an effective registration statement or in the open
market pursuant to Rule 144 under the Securities Act or otherwise or (ii) in
connection with any merger or business combination of the Company approved by
the Board of Directors.
11.2. Reimbursement of the Company by the Shareholder.
(a) In the event that each of the following conditions has been
satisfied: (i) a meeting of the shareholders of the Company to consider and
vote upon the approval of the Amendment (as defined in the Company Agreement)
shall have been duly convened and held; (ii) all of the Shares (as defined in
the Company Agreement) then issued and outstanding and the Shares acquired from
the Shareholder by Purchaser hereunder shall have been voted at such meeting in
favor of approval of the Amendment, (iii) there shall not have been in effect
as of the date of such meeting any Law or injunction or other order of any
Governmental Body restraining or preventing the Shareholder from voting any
shares of Stock as to which he possessed the power to vote in favor of approval
of the Amendment, and (iv) the Amendment shall not have been approved in
accordance with applicable Law and the Charter and By-laws of the Company, then
the Shareholder shall reimburse the Company for any amounts (but not to exceed
$1,000,000 in the aggregate) paid by the Company to Purchaser as liquidated
damages pursuant to Section 6.5 of the Company Agreement.
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(b) The Shareholder shall reimburse the Company for an amount
equal to 20% of (i) the fee of $1,000,000 to be paid by the Company to an
affiliate of Purchaser pursuant to Section 3(b) of the Financial Advisory
Agreement to be entered into between the Company and such affiliate upon the
Closing (as defined in the Company Agreement) and (ii) the fees and
disbursements of Cleary, Gottlieb, Steen & Hamilton.
ARTICLE XII
REGISTRATION AND OTHER SHAREHOLDER RIGHTS
12.1. Demand Registration.
(a) Upon receipt by the Company at any time following the second
anniversary of the Closing Date of a written request from the Shareholder for
registration of the resale of any Registrable Shares, the Company shall use its
commercially reasonable efforts to cause a registration statement to be filed
under the Securities Act, and any other applicable Laws, within 60 days after
the receipt of such request. The Company shall use all commercially reasonable
efforts to cause any such registration statement to become effective and to
maintain the effectiveness of such registration statement until (x) the date
all Registrable Shares have been sold pursuant thereto or (y) 180 days after
the effective date of such registration statement. The term "registration
statement" means a registration statement filed under the Securities Act, or
any similar disclosure document, filing, or listing particulars utilized in
connection with a Public Equity Offering.
(b) The Shareholder shall be permitted to make two requests
pursuant to the provisions of Section 12.1(a), provided that no request will be
(i) allowed unless the Company and the security offering shall at that time
satisfy the eligibility requirements for use of Form S-1 or any successor form
and (ii) counted against this limit unless, it has become effective and
remained effective for a period of at least 30 days; provided, however, that
if, within 180 days after it has become effective, an offering of Registrable
Shares pursuant to a registration is interfered with by any stop order,
injunction, or other order or requirement of the Commission or other
Governmental Body, such registration will be deemed not to have been effected
and will not count as a Demand Registration. A registration that is undertaken
by the Company in response to a valid request made by the Shareholder pursuant
to this Section 12.1 shall be referred to herein as a "Demand Registration."
Notwithstanding the foregoing provisions of this Section 12.1(b), the Company
shall not be required to register any Registrable Shares pursuant this Section
12.1(b) at any time (i) within 120 days of the effective date of any
registration statement filed as a result of the exercise of any demand
registration rights by the Shareholder or any other shareholder of the Company,
or (ii) in the event that the Company has registered shares of any class of its
capital stock pursuant to any demand registration rights on more than two
occasions in the preceding 12 months.
(c) The Company shall pay all registration expenses incurred with
respect to Section 12.1(a) (other than customary underwriting and broker
commissions), including, without limitation, the reasonable fees and
disbursements of one (but only one) legal firm or counsel to represent
Purchaser and the Shareholder in the case of a Demand Registration.
(d) The offering of Registrable Shares pursuant to a Demand
Registration shall be in the form of a "firm commitment" underwritten offering.
The Shareholder shall select the investment banking firm or firms to manage the
underwritten offering; provided, however, that such selection shall be subject
to the consent of the Company, which consent shall not be unreasonably withheld
or delayed.
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12.2. Incidental or "Piggyback" Registration Rights.
(a) If the Company or any holder of shares of Stock proposes to
sell shares of Stock in a Public Equity Offering, the Company shall give
written notice, at least 15 days prior to the filing of a registration
statement related to such Public Equity Offering (other than a registration
statement relating solely to employee benefit plans or to effect any
acquisition or combination with another Person), of such proposed Public Equity
Offering to the Shareholder which notice shall offer to the Shareholder and his
Affiliates the opportunity to include in such Public Equity Offering such
number of Registrable Shares as the Shareholder and his Affiliates may request.
Within 20 days after receipt of such notice, the Shareholder and his Affiliates
shall, subject to the following sentence, have the right by notifying the
Company in writing to require the Company to include in the registration
statement relating to such Public Equity Offering such number of Registrable
Shares as the Shareholder or his Affiliates may request. Notwithstanding the
foregoing, (x) if at any time the managing underwriter or underwriters of such
Public Equity Offering (the "Managing Underwriter") shall advise the Company in
writing that, in its opinion, the total number of shares proposed to be sold in
such Public Equity Offering (including the total number of Registrable Shares
that the Shareholder and his Affiliates have requested to be sold in such
Public Equity Offering and the total number of shares of Stock requested to be
included by any other selling shareholder entitled to sell shares in such
Public Equity Offering) exceeds the maximum number of shares which the Managing
Underwriter believes may be sold without materially adversely affecting the
price, timing, or distribution of the Public Equity Offering, then the Company
will be required to include in such Public Equity Offering only that number of
shares which the Managing Underwriter believes may be sold without causing such
adverse effect in the following order: (i) all the shares that the Company
proposes to sell in such Public Equity Offering, (ii) all the shares that are
proposed to be sold by any shareholder of the Company who is exercising a
demand registration right, if such Public Equity Offering is being made
pursuant to such demand, and (iii) shares of the Shareholder and his Affiliates
and all other shares that are proposed to be sold by any shareholder of the
Company exercising a so-called "piggyback" registration right on a pro rata
basis in an aggregate number which is equal to the difference between the
maximum number of shares that may be distributed in such Public Equity Offering
as determined by the Managing Underwriter and the number of shares to be sold
in such Public Equity Offering pursuant to clauses (i) and (ii) above, and (iv)
any other shares of Stock requested to be included in such Public Equity
Offering.
(b) The Company will have the right to postpone or withdraw any
registration statement relating to a Public Equity Offering described under
this Section 12.2 prior to the effective date of such registration statement
without obligation to the Shareholder or his Affiliates. Purchaser shall, and
shall cause its Affiliates to, use their respective commercially reasonable
efforts to cause all registration expenses of the Shareholder and his
Affiliates (other than customary underwriting and broker commissions) to be
paid by the Company in the case of any and all registrations governed by this
Section 12.2.
12.3. Suspension. In connection with any proposed registration of
Registrable Shares pursuant to Section 12.1 or 12.2, during any consecutive
365-day period, the Company shall be entitled to postpone the filing of or to
suspend availability of a registration statement for up to two
60-consecutive-day periods if (i) at the time the Company receives a request
for a Demand
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Registration, the Company or any Subsidiary is engaged in confidential
negotiations or other confidential business activities, disclosure of which
would be required in such registration statement (but would not be required if
such registration statement were not filed), and the Board of Directors
determines in good faith that such disclosure would be materially detrimental
to the Company and its shareholders or would have a material adverse effect on
any such confidential negotiations or other confidential business activities,
(ii) prior to receiving such request, the Board of Directors were to have
determined to effect a Public Equity Offering for the Company's account and the
Company had taken substantial steps (including, but not limited to, selecting a
managing underwriter for such offering) and is proceeding with reasonable
diligence to effect such offering, or (iii) the Company shall furnish to
Purchaser a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company and its shareholders for such registration to be
pursued at such time; provided, however, that any suspension under clause (iii)
shall not exceed 60 days.
12.4. Preparation and Filing.
(a) Whenever the Company seeks to effect the registration of any
Registrable Shares in accordance with the provisions of Section 12.1 or 12.2,
the Company shall:
(i) prepare and file with the Commission or other applicable
Governmental Body a registration statement with respect to such
Registrable Shares and use its commercially reasonable efforts to
cause such registration statement to promptly become and, subject to
Section 12.3, remain effective for the period set forth in subsection
(ii) below and promptly notify the Shareholder (x) when such
registration statement becomes effective, (y) when any amendment to
such registration statement becomes effective and (z) of any request
by the Commission or other applicable Governmental Body for any
amendment or supplement to such registration statement or any
prospectus relating thereto or for additional information;
(ii) prepare and file with the Commission or other applicable
Governmental Body such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act, and any other applicable
Laws, with respect to the sale or other disposition of all securities
covered by such registration statement for a period of not less than
180 days after the effective date of such registration statement (or
such shorter period to the extent necessary to permit the completion
of the sale or distribution of such securities within such period);
(iii) furnish to the Shareholder, prior to filing a
registration statement, copies of such registration statement as
proposed to be filed and thereafter, such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and financial statements, reports, and proxy
statements mailed to shareholders of the Company as the Shareholder
may reasonably request in order to facilitate the disposition of the
Registrable Shares being sold;
(iv) use its commercially reasonable efforts to register or
qualify, not later than the effective date of any filed registration
statement, the Registrable Shares
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covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Shareholder reasonably
requests; provided, however, that the Company will not be required to
(A) qualify to do business as a foreign corporation or as a dealer in
any jurisdiction where it is not so qualified, (B) subject itself to
taxation in any jurisdiction where it is not subject to taxation, (C)
consent to general service of process in any jurisdiction where it is
not subject to general service of process, or (D) take any action that
would subject it to service of process in suits other than those
arising out of the offer or sale of the Registrable Shares covered by
the registration statement;
(v) make available, upon reasonable notice and during
business hours, for inspection by the managing underwriter(s) for the
Registrable Shares (and one counsel representing such managing
underwriter(s)) (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents, agreements, and
properties of the Company and its Subsidiaries and Affiliates as shall
be reasonably necessary to enable them to exercise their due diligence
responsibilities ("Records") and cause the Company's officers,
directors, and employees to supply all information reasonably
requested by any such Inspectors in connection with the registration
statement; provided, however, that, unless the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in
the registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, the Company shall not be required to provide any
information under this subparagraph (v) if (A) the Company believes,
after consultation with counsel for the Company, that to do so would
cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (B) if either (1) the Company has
requested and been granted from the Commission confidential treatment
of such information contained in any filing with the Commission or
documents provided supplementally or otherwise or (2) the Company
reasonably determines in good faith that such Records are confidential
and so notifies the Inspectors in writing unless prior to furnishing
any such information with respect to (A) or (B) such holder of
Registrable Shares requesting such information agrees to enter into a
confidentiality agreement in a form reasonably acceptable to the
Company; and, provided, further, that each holder of Registrable
Shares agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give prompt
notice to the Company and allow the Company, at its expense, to
undertake appropriate action and to prevent disclosure of the Records
deemed confidential;
(vi) obtain a comfort letter from the Company's independent
public accountants dated within five business days prior to the
effective date of the registration statement (and as of such other
dates as the managing underwriter(s) for the Registrable Shares may
reasonably request) in customary form and covering such matters of the
type customarily covered by such comfort letters as such managing
underwriter(s) reasonably request;
(vii) obtain an opinion of counsel dated the effective date
of the registration statement (and as of such other dates as the
managing underwriter(s) for the Registrable Shares may reasonably
request) in customary form and covering such matters of the type
customarily covered by such opinions as counsel designated by such
managing underwriter(s) reasonably request;
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(viii) during the period when the registration statement is
required to be effective, notify the Shareholder of the happening of
any event as a result of which the prospectus included in the
registration statement contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will forthwith prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;
(ix) in the case of an underwritten offering, enter into an
underwriting agreement containing customary terms, including such
indemnity and contribution provisions as the managing underwriter(s)
customarily require or may reasonably require;
(x) cause such Registrable Shares to be listed for trading on
the primary securities exchange or quotation system upon which the
Stock is then listed or traded; and
(xi) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission,
and other applicable Governmental Bodies, and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, beginning within three
months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act.
(b) The Shareholder shall timely furnish to the Company such
information (including affidavits) regarding the distribution of such
Registrable Shares as the Company may from time to time reasonably request. The
Company may exclude from such registration the securities of the Shareholder or
his Affiliates if he or they fail to furnish such information within 10 days
after such request; provided, however, that the Company's registration
statement relating to such offering is effective within 60 days after the
expiration of such 10-day period.
(c) The Shareholder agrees that upon the receipt of any notice
from the Company of the happening of any event of the kind described in
paragraph (a)(viii) above, it will forthwith discontinue disposition of
Registrable Shares pursuant to the registration statement covering such
Registrable Shares until the Shareholder's receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph (a)(viii) above.
If the Company gives any such notice, the Company shall keep any such
registration statement pursuant to a Demand Registration effective for that
number of additional days equal to the number of days during the period from
and including the date of the giving of such notice pursuant to paragraph
(a)(viii) above to and including the date on which copies of such supplemented
or amended prospectus are made available to the Shareholder.
12.5. Indemnification. In connection with the filing of a registration
statement providing for the registration of any Registrable Shares pursuant to
Section 12.1 or 12.2, the Company shall indemnify and hold harmless the
Shareholder and his Affiliates, to the extent customary and reasonable,
pursuant to indemnification and contribution provisions to be entered into by
the Company at the time of filing of such registration statement. The
Shareholder and his
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Affiliates shall indemnify the Company and its directors and officers and each
Person who controls the Company (within the meaning of the Securities Act or
the Exchange Act) against any and all Losses resulting from any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement, prospectus, or any preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission is made
in reliance upon and in strict conformity with information furnished in writing
to the Company by Shareholder for use in such registration statement; provided,
however, that the obligation to indemnify will be several and not joint and
several, among such sellers of Registrable Shares, and the liability of each
such seller of Registrable Shares will be in proportion to, and provided
further that such liability will be limited to, the net amount received by such
seller from the sale of Registrable Shares pursuant to such registration
statement; further provided, that such seller of Registrable Shares shall not
be liable in any such case to the extent that prior to the filing of any such
registration statement or prospectus or amendment thereof or supplement
thereto, such seller has furnished in writing to the Company information
expressly for use in such registration statement or prospectus or amendment
thereof or supplement thereto which corrected or made not misleading
information previously furnished to the Company.
ARTICLE XIII
TERMINATION
13.1. Termination. This Agreement may be terminated by:
(a) the written agreement of Purchaser and the Shareholder;
(b) Purchaser or the Shareholder on or after February 15, 1999,
if the Closing has not occurred prior to such date; provided, however, that in
the event the Company Agreement has previously been terminated pursuant to
Section 12.1(f) thereof, the Shareholder may not terminate this Agreement
pursuant to this clause (b) until the earlier of (i) the 30th day following the
date of consummation of the transaction provided for in the definitive
agreement or other documents giving rise to such termination of the Company
Agreement and (ii) the 180th day following such termination of the Company
Agreement;
(c) Purchaser or the Shareholder in the event of a material
breach by the other party of this Agreement, which breach is not cured within
five days after receipt of written notice thereof by the breaching party from
the non-breaching party;
(d) Purchaser or the Shareholder if there shall have been entered
a final, non-appealable order or injunction by any Governmental Body against
either party hereto or the Company that prohibits the consummation of the
transactions contemplated hereby or a material part thereof; or
(e) Purchaser or the Shareholder in the event of termination of
the Company Agreement; provided, however, that in the event the Company
Agreement is terminated pursuant to Section 12.1(f) thereof, the Shareholder
may not terminate this Agreement pursuant to this clause (e) until the earlier
of (i) the 30th day following the date of consummation of the transaction
provided for in the definitive agreement or other documents giving rise to such
termination of the Company Agreement and (ii) the 180th day following such
termination of the Company Agreement.
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13.2. Liabilities After Termination. Upon any termination of this
Agreement pursuant to Section 13.1, no party hereto shall thereafter have any
further liability or obligation hereunder; provided, however, that no such
termination shall relieve any party hereto of any liability for any intentional
breach of this Agreement prior to the date of such termination.
ARTICLE XIV
MISCELLANEOUS
14.1. Survival of Representations and Warranties. The parties hereto
hereby agree that the representations and warranties contained in this
Agreement shall survive the execution and delivery of this Agreement and the
Closing without limitation.
14.2. Entire Agreement. This Agreement (together with the Exhibits
attached hereto and the Confidentiality Agreement) contains, and is intended
as, a complete statement of all of the terms and the arrangements between the
parties hereto with respect to the matters provided for herein, and supersedes
any previous agreements and understandings between the parties hereto with
respect to those matters.
14.3. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas applicable to agreements made
in and to be wholly performed in such state.
14.4. Expenses. Purchaser shall bear all of the expenses (including,
without limitation, fees and disbursements of its financial advisor, counsel,
accountants and other experts) incurred by or on behalf of it in connection
with the preparation, negotiation, execution, delivery, and performance of this
Agreement, each of the other documents and instruments executed in connection
with or contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby. The Shareholder shall bear all of the expenses
(including, without limitation, fees and disbursements of its financial
advisor, counsel, accountants, and other experts) incurred by or on behalf of
the Shareholder in connection with the preparation, negotiation, execution,
delivery, and performance of this Agreement, each of the other documents and
instruments executed in connection with or contemplated by this Agreement and
the consummation of the transactions contemplated hereby and thereby.
14.5. Headings. The article and section headings of this Agreement are
for reference purposes only and are to be given no effect in the construction
or interpretation of this Agreement. Unless the context otherwise requires, all
references to Articles and Sections are to Articles and Sections of this
Agreement.
14.6. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or by overnight mail, or four days after being mailed by registered
mail, return receipt requested, to a party at the following address:
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If to the Shareholder, to:
Mr. Jerry E. Kimmel
6400 Cleburne Highway
Granbury, Texas 76049
Facsimile: (817) 326-2203
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Daniel S. Sternberg, Esq.
Facsimile: (212) 225-3999
If to Purchaser, to:
Wingate Partners II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Mr. Frederick B. Hegi, Jr.
Facsimile: (214) 871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Mary R. Korby, Esq.
Facsimile: (214) 746-7777
If to the Company, as provided in Section 13.6 of the Company
Agreement.
14.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
14.8. Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns. Except as expressly otherwise provided in Article X, nothing in
this Agreement shall create or be deemed to create any third-party beneficiary
rights in any Person not party to this Agreement. No assignment of this
Agreement or of any rights or obligations hereunder may be made by any party
(by operation of law or otherwise) without the prior written consent of each of
the other parties hereto and any attempted assignment without such required
consents shall be void; provided, however, that (i) the Shareholder may assign
his right to sell all or any portion of the Shares or Warrant Shares to one or
more shareholders of the Company who is a family member or Affiliate of the
Shareholder, provided that any such assignment shall not release the
Shareholder from his obligations hereunder, and (ii) Purchaser may assign its
right hereunder to purchase all or any portion of the Shares and/or the right
to receive the Warrant or any portion of the Warrant to
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such Persons as previously disclosed in writing to and approved by Shareholder
prior to the date hereof, provided that (a) no such assignment shall relieve
Purchaser of its obligations hereunder (b) any such assignee shall have
executed and delivered to the Shareholder an agreement satisfactory to the
Shareholder which shall provide that such assignee will become a party to this
Agreement and be bound by all of the obligations of Purchaser hereunder as if
such assignee were "Purchaser" hereunder, and (c) any such assignee shall have
delivered to Shareholder on or before the Closing Date the representations and
warranties set forth in Section 5.6. In the event of the death of the
Shareholder, the Shareholder's estate, the administrator or executor of his
estate, and his other heirs, devisees, legatees, and grantees shall be bound by
the provisions of this Agreement.
14.9. Amendments. This Agreement may be amended, supplemented, or
modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
14.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.11. Spousal Consent. Carmen Kimmel, being the lawful spouse of the
Shareholder, hereby certifies and agrees to the following: (i) I have read,
understand, and approve the Agreement and the attached exhibits; (ii) I agree
on behalf of myself and all my successors in interest that the Agreement and
Warrant binds my community property interest, if any, in any stock of the
Company registered in the name of my spouse on the books of the Company; (iii)
I consent to the execution, delivery, and performance of the Agreement, the
Warrant, and all other documents by my spouse relating to the Company,
including without limitation the sale of my spouse's interest in the stock of
the Company as provided herein, without the necessity of obtaining my signature
or further consent; (iv) I grant a power of attorney to my spouse for the sole
and exclusive purpose of dealing with my interest, if any, in the stock of the
Company; and (v) I acknowledge that I have been advised to seek separate
counsel in the execution of this Agreement and the Warrant.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WINGATE PARTNERS II, L.P.
By: Wingate Management Company II, L.P.,
its general partner
By: Wingate Management Limited, L.L.C.,
its general partner
By: /s/ FREDERICK B. HEGI, JR.
------------------------------------------
Frederick B. Hegi, Jr.
Principal
/s/ JERRY E. KIMMEL
------------------------------------------
JERRY E. KIMMEL
KEVCO, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
------------------------------------------
Name: Ellis L. McKinley, Jr.
----------------------------------------
Title: Vice President, Chief Financial
---------------------------------------
Officer and Treasurer
---------------------------------------
Acknowledged for the purposes of
Section 14.11 as of the date first
above written:
/s/ CARMEN KIMMEL
- ---------------------------------
CARMEN KIMMEL
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EXHIBIT A
[FORM OF WARRANT]
28
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
WERE PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED DECEMBER
23, 1998 AMONG WINGATE PARTNERS II, L.P., JERRY E. KIMMEL, AND KEVCO,
INC. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW,
AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS AND SECTION
3 OF THIS WARRANT.
No. of Shares: 220,690 Shares Warrant No. ____
WARRANT
To purchase Common Stock of
KEVCO, INC.
[______________________], 1999
THIS WARRANT CERTIFIES THAT, for value received, the registered holder
hereof, Wingate Partners II, L.P., a Delaware limited partnership ("Wingate"),
or its registered assigns, is entitled to purchase from Jerry E. Kimmel, (the
"Shareholder"), at any time and from time to time after the date hereof (the
"Initial Issue Date") and on or before 5 p.m. Eastern Standard Time, on the
Expiration Date (as hereinafter defined) 220,690 shares of the voting common
stock, par value $0.01 per share ("Voting Common Stock"), of Kevco, Inc., a
Texas corporation (the "Company") at the Basic Purchase Price (as hereinafter
defined), subject to the terms, conditions, and adjustments as hereinafter
provided in Sections 4 and 5.
Section 1. Definitions and References. Unless otherwise specified,
references herein to sections, subsections, and similar subdivisions refer to
the sections, subsections, and subdivisions of this Warrant. For all purposes of
this Warrant, the following terms shall have the meanings hereinafter indicated:
"Affiliate" with respect to a party to this Agreement shall
mean any Person that directly or indirectly (through one or more intermediaries
or otherwise) controls, is controlled by, or is under common control with, such
Person.
"Basic Purchase Price" shall mean the price of $10.25 per
share of the Common Stock.
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean a day on which commercial banks are
open for business with the public in New York, New York.
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"Commission" shall mean the Securities and Exchange Commission
and any other similar or successor agency of the federal government then
administering the Securities Act or the Exchange Act.
"Common Stock" shall mean the Voting Common Stock, the
nonvoting common stock, par value $.01 per share, of the Company ("Nonvoting
Common Stock"), and any capital stock into which such Common Stock thereafter
may be changed or converted.
"Common Stock Equivalents" shall mean (without duplication
with any other Common Stock or Common Stock Equivalents) rights, warrants,
options, convertible securities or convertible indebtedness, exchangeable
securities or exchangeable indebtedness, or other rights, exercisable for or
convertible or exchangeable into, directly or indirectly, Common Stock, and any
stock appreciation rights or similar rights to payment based upon the value of
the Company's common equity, whether at the time or upon the occurrence of some
future event including all shares of Common Stock issuable in respect of this
Warrant to the extent not issued and outstanding.
"Composite Tape" shall mean, with respect to any security, the
reporting by the National Association of Securities Dealers (or any successor
reporting mechanism) of all trades of such security occurring on all exchanges
on which such security is traded.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time in question.
"Expiration Date" shall mean the fifth anniversary of the
Initial Issue Date.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivisions thereof, whether federal,
state, or local, or any agency or instrumentality thereof, or any court or
arbitrator (public or private).
"Holder" shall mean the initial holder of this Warrant, and
any Person to whom this Warrant, or any portion thereof, is subsequently
transferred of record.
"Independent Director" shall mean any director of the Company
not affiliated with Wingate or its assigns or the Shareholder and who do not
have any other relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
"Lien" shall mean any lien, charge, claim, encumbrance, or
right of a third party with respect to the property in question.
"Market Price" shall mean, with respect to any Common Stock,
on a per share basis and as of any date, an amount equal to the average, for
each of the ten (10) consecutive Trading Days immediately prior to such date, of
the closing prices for a share of Common Stock on such Trading Day as reported
on the Composite Tape (as reported in The Wall Street Journal or, if not
reported thereby, any other authoritative source). If no price can be determined
under the foregoing, then the "Market Price" shall be deemed to be the fair
market value thereof, as determined by the majority of the Independent Directors
of the Company's Board of Directors in good faith as of a date which is within
fifteen (15) days preceding the date as of which the determination is to be
made.
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"NASDAQ" shall mean the NASDAQ Stock Market.
"Person" shall mean any individual, partnership, joint
venture, corporation, trust, unincorporated organization, or other entity.
"Purchase Price" shall mean, as of any date, the Basic
Purchase Price as adjusted pursuant to Section 6.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time in question.
"Trading Day" means any day on which NASDAQ is open for
trading, or if the shares of Common Stock are not quoted on NASDAQ, any day on
which the principal national securities exchange or national quotation system on
which the shares of Common Stock are listed, admitted to trading or quoted is
open for trading.
"Transfer", as used in Section 3, shall mean any disposition
of this Warrant, any Warrant Shares, or of any interest therein, which would
constitute a sale of or an offer to sell such Warrant or Warrant Shares within
the meaning of the Securities Act.
"Warrant" or "Warrants" shall mean this Warrant and any
Warrant or Warrants issued upon transfer hereof, including all amendments to any
such Warrants and together with all Warrants issued in exchange, transfer or
replacement of any thereof.
"Warrant Shares" shall mean all shares of Common Stock
purchased or purchasable by the registered Holders of the Warrants upon the
exercise thereof, provided that such shares of Common Stock shall be deemed to
include all other shares of Common Stock issued or issuable in connection
therewith, whether as a result of stock dividends, exchanges, stock splits,
reverse stock splits, recapitalizations, mergers, consolidations, or otherwise.
Section 2. Ownership of This Warrant; Delivery of Shares into Escrow;
Term of Warrant.
(a) Ownership. Shareholder may deem and treat the Person in whose name
this Warrant is registered as the Holder and owner hereof for all purposes,
notwithstanding any notations of ownership or writing hereon made by anyone
other than Shareholder, and shall not be affected by any notice to the contrary,
until presentation of this Warrant for registration of transfer as provided in
Section 3(b). The Company shall maintain on behalf of Holder and the
Shareholder, at its office or agency in Fort Worth, Texas (or at such other
office or agency of the Company as the Company shall designate from time to time
by notice to Shareholder and the registered Holder of this Warrant), a register
for the Warrants, in which the Company shall record the name and address of the
Person in whose name each Warrant has been issued, as well as the name and
address of each transferee and each prior owner of such Warrant. Within five (5)
Business Days after Shareholder or any Holder shall by notice request the same,
the Company will deliver to such Holder or Shareholder a certificate, signed by
one of its authorized officers, listing the name and address of every other
Holder, as such information appears in such register at the close of business on
the day before such certificate is signed.
(b) Escrow. Concurrently with the execution hereof, Shareholder is
delivering to the Company 220,690 shares of Common Stock (the "Escrow Shares"),
representing all of the shares
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of Common Stock deliverable upon exercise of this Warrant on the date hereof,
such shares to be held in escrow by the Company for the benefit of Holder upon
exercise of this Warrant. Shareholder agrees and covenants (i) that he will take
no action, nor willfully permit any action to be taken, that would result in any
Lien being placed on the shares of Common Stock so placed in escrow and (ii)
that he will forthwith deliver to the Company, upon request of the Company or
the Holder, any shares of Common Stock that become subject to this Warrant in
the future as a result of adjustments pursuant to Section 5 hereof, free and
clear of any Lien. Shareholder authorizes the Company, or, at any time that
Company uses a stock transfer agent, the Company's transfer agent, to place a
stop transfer legend on the stock transfer records of the Company in respect of
such shares of Common Stock until the earlier of (i) the exercise of this
Warrant with respect to such shares of Common Stock or (ii) the expiration or
cancellation hereof. Shareholder hereby authorizes the Company to act in his
place and stead in delivering Warrant Shares upon exercise of this Warrant and
authorizes the Company to accept payment of the Purchase Price on Shareholder's
behalf upon exercise, or partial exercise, of this Warrant. The Company agrees
to promptly pay over to Shareholder such Purchase Price.
(c) Term. This Warrant shall be void after 5:00 p.m. Eastern Standard
time on the Expiration Date. To the extent that this Warrant, or any portion
hereof, has not been exercised before 5:00 p.m. Eastern Standard time on the
Expiration Date, all shares of Common Stock held pursuant hereto will be
immediately released to Shareholder and the Company will remove, or cause to be
removed, all stop transfer legends placed thereon as a result of such escrow.
(d) No Rights as Shareholder. Notwithstanding the foregoing, nothing in
this Warrant shall be construed as conferring upon the Holder or its transferees
any rights as a shareholder of the Company, including the right to vote, receive
dividends, consent or receive notices as shareholder with respect to any meeting
of shareholders for the election of directors of the Company or any other
matter. Shareholder shall retain all rights as a shareholder of the Company with
respect to the Escrow Shares including any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger conveyance, or
otherwise) or to receive notice of meeting, and except as otherwise provided for
herein receive dividends or subscription rights or otherwise until the Warrant
shall have been exercised as provided herein.
Section 3. Exchange, Transfer and Replacement.
(a) Exchange. This Warrant is exchangeable, upon the surrender hereof
by the registered Holder to Shareholder at the Company's office or agency
provided for in Section 2, for new Warrants of like tenor, representing in the
aggregate the right to purchase the number of shares of the Common Stock
purchasable hereunder or under any other Warrants tendered herewith, each of
such new Warrants to represent the right to purchase such number of shares of
the Common Stock as shall be designated by said registered Holder at the time of
such surrender, not to exceed the aggregate shares of Common Stock purchasable
on the exercise of all such tendered Warrants.
(b) Transfer. This Warrant and all rights hereunder are transferable,
in whole or in part, but only upon the register provided for in Section 2 and
only upon satisfaction of the conditions set forth in this Warrant, by the
registered Holder hereof, and a new Warrant shall be made and delivered by the
Company on behalf of Shareholder, of the same tenor as this Warrant but
registered in the name of the transferee, upon surrender of this Warrant with
the assignment
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form attached hereto duly completed, at said office or agency of the Company. No
sale, transfer, or other disposition of this Warrant or the Warrant Shares
issuable hereunder will be made without registration under the Securities Act
and applicable state securities laws or pursuant to exemptions therefrom. The
Company or Shareholder may, as a condition to any such transfer, require an
opinion of counsel reasonably satisfactory to it that such transfer complies
with all applicable federal and state securities laws.
(c) Replacement. Upon receipt by Shareholder at the Company's office or
agency provided for in Section 2 of evidence reasonably satisfactory to
Shareholder of the loss, theft, destruction or mutilation of this Warrant, and,
in the case of loss, theft, or destruction, of indemnity or security reasonably
satisfactory to Shareholder and the Company, and upon surrender of this Warrant,
if mutilated, the Company on behalf of Shareholder will make and deliver a new
Warrant of like tenor, in replacement of this Warrant; provided that, if Wingate
or any of its Affiliates shall be the registered Holder hereof, an agreement of
indemnity (in form reasonably satisfactory to Shareholder) by such registered
Holder shall be sufficient for all purposes of this Section 3.
(d) Cancellation and Taxes. This Warrant shall be promptly cancelled by
Shareholder upon the surrender hereof in connection with any exchange, transfer,
or replacement pursuant to this Section 3.
(e) Legend. All Warrants issued upon transfer hereof, including all
amendments to any such Warrants shall be imprinted with a legend in
substantially the following form (in addition to any legend required by state
securities laws):
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT WERE PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED DECEMBER 23,
1998, AMONG WINGATE PARTNERS II, L.P., JERRY E. KIMMEL, AND KEVCO, INC. NEITHER
THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAW AND SECTION 3 OF THIS
WARRANT.
Section 4. Exercise of this Warrant.
(a) In order to exercise this Warrant in whole or in part, the
registered Holder hereof shall complete a subscription form in the form attached
hereto and deliver to Shareholder at the Company's office or agency provided for
in Section 2 such subscription form, this Warrant and the aggregate Purchase
Price of the shares of the Common Stock then being purchased; provided that any
single exercise of this Warrant not made in whole must be for a minimum of 5,000
Warrant Shares as adjusted pursuant to Section 6.
(b) Such Purchase Price shall be paid to Shareholder in lawful money of
the United States by company check of Wingate or an Affiliate of Wingate, or, if
the Holder is other than Wingate or an Affiliate of Wingate, by certified check
drawn on a banking institution chartered by the government of the United States
or any state thereof or wire transfer of funds.
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(c) The exercise of this Warrant shall be deemed to have been effected
and the Purchase Price and the number of shares of the Common Stock issuable in
connection with such exercise shall be determined as of the close of business on
the Business Day on which the last to be delivered of such completed
subscription form and all other items required to be delivered in connection
with such exercise by the registered Holder hereof pursuant to this Section 4
shall have been delivered to the Company on behalf of Shareholder at the
requisite office or agency of the Company. Upon receipt of such form and other
items, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, deliver from escrow such shares of Common
Stock as shall be specified on such form and for which the Purchase Price has
been tendered. The Company hereby undertakes to prepare a new certificate or
certificates, in such number of shares as is requested by Holder, and deliver
such certificate(s) representing the number of shares of Common Stock to be
received upon exercise hereof. To the extent that this Warrant is exercised only
in part, Shareholder agrees to execute and deliver a new Warrant of like tenor
to Holder for the purchase of the remaining shares subject to this Warrant.
Section 5. Payment of Taxes. The Company shall pay any and all
documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Warrant Shares or of other securities or property
deliverable upon exercise of the Warrants evidenced by this Warrant representing
such shares or securities (other than income taxes imposed on Holders); provided
that the Company shall not be required to pay any such tax or other charge that
may be imposed in connection with any transfer involved in the issue of any
certificate for Warrant Shares or other securities or property, or payment of
cash, to any Person other than the Holder who surrendered a Warrant upon
exercise, and in case of any such tax or charge, the Company shall not be
required to issue any security or property or pay any cash until such tax or
charge has been paid or it has been established to the Company's satisfaction
that no such tax or charge is payable.
Section 6. Share Adjustment Provisions; Adjustment of Purchase Price.
The Purchase Price from time to time in effect under this Warrant, and the
number of Warrant Shares subject to purchase hereunder, shall be subject to
adjustments from time to time as hereinafter set forth in this section.
(a) Common Stock Splits. Upon any subdivision by the Company on or
after the Initial Issue Date of all of its outstanding shares of Common Stock
into a greater number of shares or upon any issuance by the Company on or after
such date of a greater number of shares of Common Stock in a pro rata exchange
for all of its outstanding shares of Common Stock, then in each case from and
after the record date for such subdivision or exchange the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be increased in
proportion to such increase in the number of outstanding shares of Common Stock,
and the Purchase Price then in effect shall be correspondingly decreased. Upon
any pro rata reduction by the Company on or after the Initial Issue Date of its
outstanding shares of Common Stock as a whole or upon any issuance by the
Company after such date of a lesser number of shares of Common Stock in a pro
rata exchange for all of its outstanding shares of Common Stock, then in each
case from and after the record date for such reduction or exchange the number of
Warrant Shares purchasable upon the exercise of this Warrant shall be decreased
in proportion to such reduction in the number of outstanding shares of Common
Stock, and the Purchase Price then in effect shall be correspondingly increased.
(b) Common Stock Dividends. Upon any declaration and payment by the
Company on or after the Initial Issue Date of a dividend upon Common Stock
payable in Common Stock,
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then in each case from and after the payment of such stock dividend, the number
of Warrant Shares purchasable upon the exercise of this Warrant shall be
increased in proportion to the increase in the number of outstanding shares of
Common Stock through such stock dividend, and the Purchase Price then in effect
shall be correspondingly decreased.
(c) Other Issues. Upon any issuance by the Company to the Shareholder
or his Affiliates or family members (the "Shareholder Group") of shares of
Common Stock on or after the Initial Issue Date (other than issuances of stock
requiring adjustments hereunder pursuant to the immediately preceding
subsections (a) and (b) of this Section 6) for a consideration lower than the
Market Price per share of stock in effect immediately prior to such issuance,
the Purchase Price then in effect shall be reduced or increased, as appropriate,
to equal the following amount:
(D x E) + (F x G)
-----------------
C x E
where C equals the number of shares of Common Stock beneficially owned by the
Shareholder Group immediately after such additional issuance, D equals the
number of shares of Common Stock beneficially owned by the Shareholder Group
prior to the issue of such additional Common Stock, E equals the Market Price
per share of stock in effect immediately prior to the issue of such additional
Common Stock, F equals the aggregate consideration (before deducting
underwriting discounts, commissions, and other expenses) received or to be
received by the Company in connection with the issuance of such additional
Common Stock, and G equals the Purchase Price which would have been in effect
immediately prior to such issuance had all previous adjustments (if any) under
this subsection (c) been made pursuant to the foregoing formula. Upon any such
reduction in the Purchase Price, the number of Warrant Shares purchasable upon
the exercise of this Warrant shall be correspondingly increased. The provisions
of this subsection (c) shall not be applicable to any issuance of Common Stock
upon actual exercise or actual conversion of any option, warrant, right, or
other security convertible into or exercisable for Common Stock if the Purchase
Price was fully and properly adjusted pursuant to the immediately following
subsection (d) at the time such option, warrant, right, or other security was
issued.
(d) Common Stock Options; Subscription Rights; Convertible Securities.
Upon any issuance by the Company to any member of the Shareholder Group on or
after the Initial Issue Date of options or rights to subscribe for shares of
Common Stock or of any securities convertible into or exchangeable for shares of
Common Stock or of any similar securities for a consideration per share less
than the Market Price in effect immediately prior to the issuance of such
options, rights, or securities, the Purchase Price shall be reduced (and the
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be appropriately increased or reduced), by making computations in
accordance with subsection (c) of this Section 6; provided that:
(i) The maximum number of shares of Common Stock deliverable under
any such option or right shall be considered to have been delivered at
the time such option or right was issued, for a consideration equal to
the minimum purchase price per share of Common Stock provided for in
such option or right, plus the consideration, if any, received by the
Company for such option or right (before deducting underwriting
discounts, commissions, and other expenses);
(ii) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or exchange for any such securities
shall be considered to have been
7
35
delivered at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for
such securities (before deducting underwriting discounts, commissions,
and other expenses) plus the minimum consideration (other than such
securities) to be received by the Company upon the exchange or
conversion of such securities;
(iii) If the purchase or conversion price provided for in any
rights or options referred to above, the additional consideration, if
any, payable upon the conversion or exchange of convertible securities
referred to above, or the rate at which any convertible securities
referred to above are convertible into or exchangeable for shares of
Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Purchase Price (and the
number of shares of Common Stock purchasable upon the exercise of this
Warrant) in effect at the time of such event shall be readjusted to the
Purchase Price (and the number of shares of Common Stock purchasable
upon the exercise of this Warrant) which would have been in effect at
such time had such rights, options, or convertible securities still
outstanding provided for such new purchase or conversion price,
additional consideration, or conversion rate, as the case may be, at
the time initially granted, issued, or sold. If the purchase or
conversion price provided for in any such right or option referred to
above, the additional consideration, if any, payable upon the
conversion or exchange of convertible securities referred to above, or
the rate at which any convertible securities referred to above are
convertible into or exchangeable for shares of Common Stock shall be
changed at any time by reason of provisions designed to protect against
dilution, then when shares of Common Stock are delivered upon the
exercise of any such right or option or upon conversion or exchange of
any such convertible security, the Purchase Price (and the number of
shares of Common Stock purchasable upon the exercise of this Warrant)
then in effect hereunder shall be readjusted to such amount as would
have been obtained had such right, option, or convertible security
never been issued as to such shares of Common Stock and had the
adjustments required hereunder been made at the time of the issuance of
the shares of Common Stock delivered as aforesaid; and
(iv) On the expiration of any such options or rights, or at the
termination of any such rights to convert or exchange, the Purchase
Price (and the number of shares of Common Stock purchasable upon the
exercise of this Warrant) then in effect shall be readjusted to the
Purchase Price (and the number of shares of Common Stock purchasable
upon the exercise of this Warrant) which would have been in effect had
the adjustments (and readjustments) made upon the issuance of such
expired or terminated options, rights, or securities (or upon the
occurrence of any event with respect thereto specified in the
immediately preceding subsection (iii)) not been made. Notwithstanding
the prior sentence, the Holder shall not be required to surrender or
adjust any shares of Common Stock theretofore received by the Holder
upon exercise of a Warrant.
(e) Special Dividends; Purchase Rights.
(i) If at any time on or after the Initial Issue Date the Company
shall distribute to all holders of shares of Common Stock of any class
evidences of its indebtedness or assets (excluding any regular periodic
cash dividend) or a distribution in partial liquidation, each payable
otherwise than in shares of Common Stock or in securities to which the
provisions of the immediately following subsection (e)(ii) are
applicable, Shareholder shall pay to the Holder of this Warrant, upon
the exercise hereof at any time on or after the payment of such
dividend or distribution, the securities and
8
36
other property (including cash) which such Holder would have received
(together with all subsequent distributions thereon) if such Holder had
exercised or converted this Warrant on the record date fixed in
connection with such dividend or distribution, and Shareholder shall
take whatever steps are necessary or appropriate to keep available at
all times any securities and other properties which are required to
fulfill such obligations of Shareholder. Notwithstanding the foregoing,
the rights of the Holder hereof under this subsection (e)(i) upon the
Company's declaration of a dividend or distribution in partial
liquidation payable only in securities convertible into shares of
Common Stock may be exercised only in lieu of any adjustment (in this
subsection (e) called a "subsection (d) adjustment") because of such
dividend or distribution called for under subsection (d) of this
Section 6, and upon exercise hereof such Holder must elect (as
indicated in the subscription form attached hereto) either such
subsection (d) adjustment or the rights and benefits provided for in
this subsection (e)(i). Upon the election by Holder of rights under
this subsection (e)(i), and delivery of the subscription form to
Shareholder, Shareholder shall exercise such rights on behalf of Holder
and deliver to Holder certificates for any Common Stock so received,
originally executed for transfer to Holder promptly upon receipt
thereof from the Company. For the purposes of determining the Purchase
Price from time to time in effect and the number of shares from time to
time subject hereto prior to the exercise hereof, it shall be assumed
that the Holder hereof will so elect subsection (d) adjustments, but
upon any election of the rights and benefits provided for in this
subsection (e)(i) made at the time of exercise hereof the Purchase
Price then in effect (and the number of outstanding shares of Common
Stock purchasable upon such exercise) shall be redetermined to equal
the amounts which would have been in effect had such subsection (d)
adjustments never been made. Notwithstanding the provisions of this
subsection (e)(i), in no event shall any Holder have the right to, or
the right to elect to, receive Common Stock pursuant to this Warrant
if, as a result thereof, a "change of control" could be deemed to occur
under that certain Indenture dated as of December 1, 1997, by and among
the Company, the Subsidiary Guarantors (as defined therein) and United
States Trust Company of New York, as Trustee, and, in lieu thereof, the
Holder shall have the right to receive, or the right to elect to
receive, Nonvoting Common Stock. Shareholder hereby undertakes to
deliver or cause to be delivered to the Company shares of Common Stock
in equivalent number to any shares of Nonvoting Common Stock
deliverable pursuant to this provision. The Company hereby undertakes
to deliver to Holder, upon receipt of such Common Stock from
Shareholder (which shall include any shares held in escrow) such shares
of Nonvoting Common Stock.
(ii) If at any time on or after the date hereof the Company shall
grant, issue or sell any options or rights to purchase stock, warrants,
securities or other property pro rata to the holders of Common Stock of
all classes ("Purchase Rights"), then each Holder shall be entitled
(but not obligated) to acquire from Shareholder upon 10 days notice and
subject to advance payment to Shareholder of the consideration, costs
and expenses, if any, related to the Purchase Rights, in lieu of any
subsection (d) adjustment and upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could
have acquired if it had held the number of shares of Common Stock
purchasable upon exercise of the Warrants immediately prior to the time
or times at which the Company granted, issued or sold such Purchase
Rights.
(f) Effect of Reorganization and Asset Sales. If any capital
reorganization of the Company, reclassification of the capital stock of the
Company, statutory exchange, consolidation or merger of the Company with another
Person, or sale of all or substantially all of the Company's assets to another
Person shall be effected in such a way that holders of Common Stock shall be
9
37
entitled to receive stock, securities or assets (including cash) of the Company
or another Person with respect to or in exchange for Common Stock (each such
transaction being hereinafter referred to as a "Transaction"), then each Holder
shall be entitled to receive, and such Warrants shall thereafter represent the
right to receive, in lieu of the Common Stock issuable upon such exercise or
conversion but otherwise upon and subject to all terms and conditions hereof,
the cash, securities or other property to which such Holder would have been
entitled upon the consummation of such Transaction if such Holder had exercised
or converted such Warrants immediately prior thereto (subject to adjustments
from and after the consummation date of such Transactions as nearly equivalent
as possible to the adjustments provided for in this Section 6).
(g) Notice of Adjustment or Substitution. On the happening of an event
requiring an adjustment of the Purchase Price and upon each change in the number
of Warrant Shares issuable upon the exercise of this Warrant, and in the event
of any change in the rights of the Holder of this Warrant by reason of other
events herein set forth, the Company shall, on behalf of Shareholder,
immediately give written notice to the registered Holder(s) of this Warrant: (i)
describing the event; (ii) stating the adjusted Purchase Price, the number of
Warrant Shares issuable upon exercise or change in rights; and (iii) stating how
such adjustment of Purchase Price or number of Warrant Shares was calculated and
the facts on which the calculation is based.
(h) Adjustment Exceptions. Anything in this Section 6 to the contrary
notwithstanding, no adjustment of the Purchase Price or the number of Warrant
Shares issuable upon the exercise of this Warrant shall be made upon (a) the
issuance of any Warrants, (b) the issuance of any Warrant Shares, and (c) the
issuance of any shares of Common Stock or (d) other options or rights to
purchase stock, warrants, other securities to any member of the Shareholder
Group who is an employee of the Company pursuant to a plan established by the
Company for the exclusive benefit of its employees. Furthermore, none of the
securities issued as described in this subsection (h) shall be deemed to be
outstanding for the purposes of making the adjustments required by Section 6(c).
(i) Company Undertakings. The Company hereby agrees to withhold from
any dividend, distribution, right, securities or property otherwise receivable
by the Shareholder as a result of any stock split, recapitalization,
reorganization, statutory exchange, Transaction, Purchase Right or like event,
such portion of the securities and other property (including cash) otherwise
payable to Shareholder as a result of his record ownership of the Warrant Shares
subject to this Warrant and to hold such securities and property in escrow for
the benefit of the Holder upon exercise of this Warrant; provided, however, that
the Company shall not be required to withhold any Purchase Right to the extent
that such Purchase Right expires prior to the Expiration Date and shall, in lieu
thereof, provide notice in accordance with Section 7 hereof.
Section 7. Notifications by the Company. If at any time:
(a) the Company shall declare upon the Common Stock any dividend or
other distribution to the holders of the Common Stock;
(b) the Company shall make an offer for subscription pro rata to the
holders of the Common Stock of any additional shares of stock of any class or
other rights whether by Purchase Rights or otherwise;
(c) the Board of Directors of the Company shall authorize (whether
definitively or subject to any conditions) any capital reorganization of the
Company, any statutory exchange,
10
38
any reclassification of the capital stock of the Company, or any consolidation
of the Company or merger of the Company with, or sale of all or substantially
all of its assets to, another Person;
(d) the Board of Directors of the Company shall authorize (whether
definitively or subject to any conditions) a voluntary dissolution, liquidation
or winding-up of the Company; or
(e) the Company shall become subject to involuntary dissolution,
liquidation or winding-up;
then, in any one or more of such cases, the Company, on behalf of the
Shareholder shall give notice thereof to each registered Holder of Warrants,
specifying (i) the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
(ii) the date on which such reorganization, reclassification, statutory
exchange, consolidation, merger, sale, dissolution, liquidation or winding-up
shall take place or be voted upon by shareholders of the Company, as the case
may be. Any such notice under subsections (a) through (e) of this section shall
also specify the date as of which the holders of record of the Common Stock
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be; such
notice shall be given not less than thirty (30) and not more than fifty (50)
days prior to the action in question (except in the case of notice for actions
under Section 7(e), which notice shall be promptly following such action) and
not less than thirty (30) and not more than fifty (50) days prior to the record
date or the date on which the Company's transfer books are closed in respect
thereto, and such notice shall state that the action in question or the record
date is subject to the effectiveness of a registration statement under the
Securities Act or to a favorable vote of stockholders, if either is required.
Section 8. Notices. All notices, requests and other communications
required or permitted to be given or delivered to registered Holders shall be in
writing, and shall be delivered, or shall be sent by certified or registered
mail, postage prepaid and addressed, to each such Holder at the address shown on
such Holder's Warrant, or at such other address as shall have been furnished to
the Company by notice from such Holder. All notices, requests and other
communications required or permitted to be given or delivered to the Company on
behalf of the Shareholder shall be in writing, and shall be delivered, or shall
be sent by certified or registered mail, postage prepaid and addressed, to
Company, as follows:
Kevco, Inc.
1300 South University, Suite 200
Fort Worth, Texas 76107
Attention: President
Telecopy Number: (817) 332-2765
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39
with a copy to:
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202-3797
Attention: Byron F. Egan
Telecopy Number: (214) 953-5822
Wingate Partners II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
James A. Johnson
Telecopy Number: (214) 871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby
Telecopy Number: (214) 746-7777
or at such other address as shall have been furnished to the registered Holders
by notice from the Company. Each such notice sent by mail as described above
shall be deemed received on the date of receipt by the Holder or the company, as
applicable.
Section 9. No Rights or Liabilities as Shareholder. This Warrant shall
not entitle any Holder hereof to any of the rights of a shareholder of the
Company, including, without limitation, the right to receive dividends, the
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger conveyance, or otherwise) or to receive notice of
meetings, (except as otherwise provided for herein) receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised as
provided herein. No provision hereof, in the absence of affirmative action by
the Holder hereof to purchase shares of the Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the Purchase Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
Section 10. Governing Law. This Warrant shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the provisions thereof relating to conflict of laws.
Section 11. Confidentiality. By its acceptance hereof each Holder of
this Warrant agrees that it will take all reasonable steps to keep confidential
any proprietary information of the Company furnished to it, provided, however,
that this restriction shall not apply to information which (i) has at the time
in question entered the public domain, (ii) is required to be disclosed by law
or by any order, rule or regulation (whether valid or invalid) of any
Governmental Body, or (iii) is furnished to purchasers or prospective purchasers
hereof (exclusive of any Person who
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40
competes with, or is an Affiliate of a Person who competes with, the Company) so
long as such purchasers and prospective purchasers have agreed to be subject to
restrictions identical to those imposed upon such Holder under this sentence.
Section 12. Miscellaneous. Unless otherwise expressly provided herein
or unless the registered Holder hereof otherwise consents in writing, all
financial statements and reports furnished by the Company pursuant to Section
6(i) or otherwise furnished hereunder to the registered Holder hereof shall be
prepared and all computations and determinations pursuant hereto shall be made
in accordance with generally accepted accounting principles in the United States
consistently applied. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against whom enforcement of the same is sought. The headings in this
Warrant are for purposes of reference only and shall not affect the meaning or
construction of any provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, ______________________ has caused this Warrant to
be signed and delivered and to be dated as of __________, 1999.
------------------------------------
By:
---------------------------------
Name:
ATTEST:
By:
--------------------------------
Name:
The Company hereby agrees to be bound by the covenants and obligations of the
Company contained herein:
KEVCO, INC.
By:
--------------------------------
Name:
Title:
14
42
ASSIGNMENT FORM
To Be Executed by the Registered Holder
Desiring to Transfer the Within Warrant of
-------------------------------------------
For Value Received, the Undersigned registered holder hereby sells,
assigns and transfers unto _______________________ the right to purchase ______
shares of the Common Stock covered by the within Warrant, and does hereby
irrevocably constitute and appoint ___________________________ as Attorney to
transfer the said Warrant on the books of the Company (as defined in said
Warrant), with full power of substitution.
Name of Registered Holder:
--------------------------------
Signature:
--------------------------------
Title of Signing Officer
or Agent (if any):
--------------------------------
Address of Registered
Holder:
--------------------------------
Dated:
-----------------------
Signed in the presence of
- -------------------------------------
43
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
Desiring to Transfer the Within Warrant of
------------------------------------------
The undersigned registered holder hereby exercises the right
to purchase ______ shares of the Common Stock covered by the within Warrant,
according to the conditions thereof, and herewith makes payment of the Purchase
Price of such shares, $____________.
Name of Registered Holder:
--------------------------------
Signature:
--------------------------------
Title of Signing Officer or Agent (if any):
--------------------------------
Address of Registered
Holder:
--------------------------------
Dated:
----------------------
44
EXHIBIT B
[FORM OF CONSULTING AGREEMENT]
45
FORM OF
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement") is made as of
_______________, 1999 between Kevco, Inc, a Texas corporation (the "Company"),
and Mr. Gerald E. Kimmel (the "Consultant").
WHEREAS, prior to the date hereof, the Consultant has served as the
Chairman of the Board of Directors of the Company (the "Board") and President
and Chief Executive Officer of the Company and has contributed greatly to the
Company's growth and success;
WHEREAS, on the date hereof, in connection with certain business
transactions which the Company is completing and in consideration of the
Company's obligations hereunder, the Company and the Consultant have agreed to
terminate the Consultant's current Employment Agreement, dated as of October 1,
1996 (the "Existing Agreement"), and the Consultant is resigning from the
positions described above;
WHEREAS, the Company desires to ensure the availability to the Company
of the Consultant's expertise and experience;
WHEREAS, following the date hereof, the Consultant will continue to be
the beneficial owner of a substantial amount of the Company's outstanding voting
common stock;
WHEREAS, the Company wishes the Consultant to continue to serve as a
Director of the Company and to serve as the non-executive Vice Chairman of the
Board and the Consultant is willing to and desirous of serving in such
positions; and
WHEREAS, the Consultant is willing to provide such assistance and
assurance, all upon and subject to the terms and conditions contained in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, the Company and the Consultant agree as
follows:
1. Term of Consultancy Engagement; Duties.
(a) Term. The Company hereby agrees to engage the Consultant as a
consultant, and the Consultant hereby agrees to serve in such capacity, for a
period of four years commencing on the date hereof (the "Term").
(b) Engagement. In his capacity as a consultant hereunder, the
Consultant periodically will make himself reasonably available to the Company to
advise with respect to issues that may arise from time to time concerning
aspects of the Company's businesses with which the Consultant has particular
expertise or experience. In performing his duties hereunder, the Consultant
shall coordinate and communicate his efforts with the Board. The Consultant
shall not be required to follow any formal schedule of duties or assignments and
shall perform the consultancy in a manner that the Consultant determines is
reasonable.
46
2. Compensation; Benefits.
(a) Compensation. In consideration for the Consultant's consulting
undertakings as set forth in paragraph 1, the Company shall pay the Consultant
an annual fee of $315,000.00 per year, which amount shall be payable in equal
installments not less than once each month during the Term. The Company shall
reimburse the Consultant promptly after receipt of an invoice evidenced by
appropriate receipts, for all reasonable business expenses (including travel
expenses) incurred by the Consultant in connection with performing consulting
services for the Company hereunder.
(b) Medical and Dental Benefits. Until the death of the survivor of the
Consultant and the Consultant's Spouse (the "Coverage Term"), the Company shall
use its reasonable best efforts to include the Consultant and Consultant's
spouse in all present and future group health, medical, dental, hospitalization,
and similar programs offered by the Company and its subsidiaries to their
respective employees generally (collectively the "Insurance Coverage"), and the
Company shall not take any action, or fail to take any action, the effect or
result of which would be to exclude or otherwise disqualify the Consultant or
Consultant's spouse from inclusion in the Insurance Coverage. During the Term,
the Company shall bear all costs and expenses of the Insurance Coverage for the
Consultant and the Consultant's spouse but at all times thereafter during the
Coverage Term, the Consultant shall bear the premium costs and shall be
responsible for all co-payments, deductibles, and all other costs in the same
manner and to the same extent as the active employees of the Company with
respect to such Insurance Coverage. During the Term, the Consultant or
Consultant's spouse cannot be included in or covered by the Insurance Coverage
or if there is no Insurance Coverage or to the extent there is no Insurance
Coverage, the Company shall obtain for Consultant or Consultant's spouse and
shall keep in full force and effect during the Term, comparable or additional
coverage for such persons; provided, however, if any such coverage is not
available or to the extent any of such coverage is not available, the Company
shall, at its sole cost and expense, pay or reimburse the Consultant and
Consultant's spouse for, all health, medical, dental, hospitalization,
deductibles, and other similar costs and expenses (collectively, the "Health
Costs") incurred or sustained by such persons during the Term not covered or
paid for by the Insurance Coverage or such other coverage, including the
insurance premiums for the Insurance Coverage or other coverage. In determining
whether coverage is "comparable coverage" the following factors, among others,
shall be considered relevant: quality of care, freedom to select facilities,
physicians, and other health care providers, relative financial responsibility
of insured and insurer to cover Health Costs, benefits and illnesses covered by
the applicable insurance, and each of obtaining health care provider services.
If the Company desires to sell or otherwise transfer to a third
party all or substantially all of the assets or equity of the Company, the
Company covenants and agrees to and with the Consultant to cause such third
party to assume the obligations set forth in this paragraph 2(b), but any such
assumption shall not relieve the Company of its obligations hereunder. The
obligations of the Company under this paragraph 2(b) shall survive the
expiration of the Term.
(c) Obligations Absolute. The Company's obligations in respect of the
compensation payments and medical and dental benefits provided herein shall be
an absolute obligation of the Company and shall be paid regardless of whether
the Consultant actually performs any consulting services during the Term and
such obligations shall not be subject to any claims or rights of set-off,
mitigation or otherwise.
2
47
3. Directorship; Information; Indemnity for Certain Expenses.
(a) Directorship. (i) For so long as the Consultant remains the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of at least twelve percent (12%) of the
outstanding common stock of the Company, the Company shall use its reasonable
best efforts to ensure that at all times the Consultant and one other person
designated by the Consultant and reasonably acceptable to the Company (such
person or any replacement designated by the Consultant, hereinafter the
"Designee") shall be directors of the Company and, to such end, the Company
agrees to (acting through the Board or otherwise) nominate the Consultant and
the Designee to serve as directors of the Company, to include the Consultant and
the Designee in the slate of nominees recommended by the Board to the Company's
shareholders for election as directors at such annual meetings (or special
meetings) as applicable and to use its reasonable best efforts to cause the
election of the Consultant and the Designee as directors of the Company,
including by soliciting proxies in favor of the election of the Consultant and
the Designee.
(ii) For so long as the Consultant remains the "beneficial owner"
of at least five percent (5%) of the outstanding common stock of the Company but
less than twelve percent (12%) of the outstanding common stock of the Company,
the Company shall use its reasonable best efforts to ensure that at all times
the Consultant shall be a director of the Company and, to such end, the Company
agrees to (acting through the Board or otherwise) nominate the Consultant to
serve as a director of the Company, to include the Consultant in the slate of
nominees recommended by the Board to the Company's shareholders for election as
directors at such annual meetings (or special meetings) as applicable and to use
its reasonable best efforts to cause the election of the Consultant as a
director of the Company, including by soliciting proxies in favor of the
election of the Consultant.
(iii) At all times during which the Consultant serves as a director
of the Company, the Company agrees to (acting through the Board or otherwise)
appoint the Consultant to serve as the non-executive Vice Chairman of the Board.
(b) Information. At any time during which the Consultant has the right
to be nominated as a director pursuant to Section 3(a) hereof, the Company will
make available to the Consultant such financial and other information concerning
the Company and its business and affairs as he may reasonably request in
connection with his status as a director of the Company.
(c) Reimbursement for Certain Expenses. The Company agrees that, in
addition to any rights the Consultant may have to indemnification or
reimbursement from the Company pursuant to the provisions of the Company's
charter, under applicable law or any applicable policy of insurance, in his
capacities as a present or former officer and/or director of the Company, the
Company will reimburse the Consultant for costs or expenses (including
reasonable attorney's fees and expenses) incurred in defending or responding to
any claim, action, suit, proceeding or investigation arising out of or
pertaining to this Agreement, the Stock Purchase Agreement, dated as of December
23, 1998, among the Consultant, the Company, and Wingate Partners II, L.P., the
Stock Purchase Agreement, dated as of December 23, 1998, between the Company and
Wingate Partners II, L.P. or any of the transactions contemplated hereby or
thereby, provided the Consultant is ultimately found not to be liable to the
Company or its shareholders in any such claim, action, suit, proceeding, or
investigation.
3
48
4. Nondisclosure of Confidential Information. Consultant acknowledges
that he may have access, during the course of service as a Consultant to the
Company, to certain confidential and proprietary information and products of the
Company (collectively referred to herein as the "Confidential Information").
Consultant agrees not to disclose any Confidential Information unless (i)
expressly authorized in writing by the Company, (ii) such Confidential
Information is publicly available or (iii) disclosure is required by any
governmental authority or in response to any valid legal process.
5. Miscellaneous.
(a) Entire Agreement. This Agreement contains, and is intended as, a
complete statement of all of the terms and the arrangements between the parties
hereto with respect to the matters provided for herein, and supersedes any
previous agreements and understandings between the Company and the Consultant,
including the Existing Agreement.
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE IN
AND TO BE WHOLLY PERFORMED IN SUCH STATE.
(c) Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally or by
overnight mail, or four days after being mailed by registered mail, return
receipt requested, to a party at the following address:
If to the Consultant, to:
Mr. Gerald E. Kimmel
6400 Cleburne Highway
Granbury, Texas 76049
Facsimile: (817) 326-2203
If to the Company, to:
Kevco, Inc.
1300 South University Drive
Suite 200
Fort Worth, Texas 76107
Facsimile: (817) 332-3403
(d) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
(e) Binding Effect; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either party without the prior written consent of
the other party.
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(f) Amendments. This Agreement may be amended, supplemented or
modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
(g) Independent Contractor. The Consultant shall be an independent
contractor and the Company shall not withhold any income or other taxes from the
payments hereunder.
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IN WITNESS WHEREOF, the Company and the Consultant have executed this
Agreement as of the day and year first above written.
KEVCO, INC.
By:
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Name:
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Title:
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GERALD E. KIMMEL