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EXHIBIT 10.7
FINANCIAL ADVISORY AGREEMENT
This Financial Advisory Agreement (this "Agreement") is made and
entered into effective as of July 26, 1999, among Kevco, Inc., a Texas
corporation ("Kevco" and, together with its subsidiaries, the "Clients"), and
Wingate Management Limited, L.L.C., a Delaware limited liability company
(together with its successors, "WML").
WHEREAS, the Clients have requested that WML render financial
advisory, investment banking, and other similar services to them in respect of
any future proposals for a tender offer, acquisition, sale, merger, exchange
offer, recapitalization, restructuring, or other similar transaction directly
or indirectly involving the Clients or any of their respective subsidiaries,
and any other person (collectively, "Extraordinary Transactions").
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by WML to the Clients, and to evidence the obligations of the Clients
to WML and the mutual covenants herein contained, the Clients hereby jointly
and severally agree as follows:
1. Retention. Each of the Clients acknowledges that it has retained
WML as its non-exclusive financial advisor in connection with any Extraordinary
Transaction that may be consummated during the term of this Agreement. WML
shall provide such financial advisory, investment banking, and other similar
services in connection with any such Extraordinary Transaction as may be
requested from time to time by the board of directors of Kevco.
2. Term. The term of this Agreement shall continue until the earlier
to occur of (i) the fifth anniversary of the delivery of a notice of
termination of this Agreement by either party hereof or (ii) the date on which
WML, Wingate Partners II, L.P., Armbuck & Co., H C Crown Corp. and their
respective affiliates (the "Initial Purchasers") cease in the aggregate to own
beneficially, directly or indirectly, five percent of the outstanding
securities of Kevco or its successors.
3. Compensation. As compensation for WML's financial advisory,
investment banking, and other similar services rendered in connection with any
Extraordinary Transaction pursuant to Section 1, the applicable Client shall
pay to WML, at the closing of any such Extraordinary Transaction, (i) a cash
fee in the amount of 1.5% of the Transaction Value of such Extraordinary
Transaction if WML originates the Extraordinary Transaction and no fee or
commission is payable by the applicable Client to any other financial advisor
or investment banking firm in respect of the origination of such Extraordinary
Transaction, or (ii) a cash fee in the amount of 1.0% of the Transaction Value
of such Extraordinary Transaction if WML does not originate such Extraordinary
Transaction but serves as the principal financial advisor to the applicable
Client in respect of the Extraordinary Transaction. "Transaction Value" means
the total value of the Extraordinary Transaction, including, the aggregate
amount of the funds required to complete the Extraordinary Transaction
(excluding any fees payable pursuant to this Section 3(a)) including the amount
of any indebtedness, preferred stock, or similar items assumed (or remaining
outstanding).
4. Reimbursement of Expenses. In addition to the compensation to be
paid pursuant to Section 3, the applicable Client or Clients shall reimburse
WML, promptly following demand therefor, together with invoices or reasonably
detailed descriptions thereof, for all reasonable disbursements and
out-of-pocket expenses (including fees and disbursements of counsel) incurred
by WML in connection with the performance by it of the services contemplated by
Section 1.
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5. Indemnification. The Clients jointly and severally shall indemnify
and hold harmless each of WML, its affiliates, and their respective directors,
officers, controlling persons (within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20(a) of the Securities Exchange
Act of 1934, as amended), if any, agents, and employees (collectively, the
"Indemnified Persons") from and against any and all claims, liabilities,
losses, damages, and expenses incurred by any Indemnified Person (including
those resulting from the negligence of the Indemnified Person and fees and
disbursements of the respective Indemnified Person's counsel) which (i) are
related to or arise out of (A) actions taken or omitted to be taken (including
any untrue statements made or any statements omitted to be made) by any Client
or (B) actions taken or omitted to be taken by an Indemnified Person with any
Client's consent or in conformity with any Client's instructions or any
Client's actions or omissions or (ii) are otherwise related to or arise out of
WML's engagement, and will reimburse each Indemnified Person for all costs and
expenses, including fees of any Indemnified Person's counsel, as they are
incurred, in connection with investigating, preparing for, defending, or
appealing any action, formal or informal claim, investigation, inquiry, or
other proceeding, whether or not in connection with pending or threatened
litigation, caused by or arising out of or in connection with WML's acting
pursuant to the engagement, whether or not any Indemnified Person is named as a
party thereto and whether or not any liability results therefrom. None of the
Clients will, however, be responsible for any claims, liabilities, losses,
damages, or expenses pursuant to clause (ii) of the preceding sentence that
have resulted primarily from WML's bad faith, gross negligence, or willful
misconduct. The Clients also agree that neither WML nor any other Indemnified
Person shall have any liability to any Client for or in connection with such
engagement except for any such liability for claims, liabilities, losses,
damages, or expenses incurred by any Client that have resulted primarily from
WML's bad faith, gross negligence, or willful misconduct. Each Client further
agrees that it will not, without the prior written consent of WML, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit, or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit, or proceeding) unless such
settlement, compromise, or consent includes an unconditional release of WML and
each other Indemnified Person hereunder from all liability arising out of such
claim, action, suit, or proceeding. EACH CLIENT HEREBY ACKNOWLEDGES THAT THE
FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL CLAIMS, LIABILITIES, LOSSES,
DAMAGES, OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED
FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT, OR CONCURRENT ORDINARY
NEGLIGENCE OF WML OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights
that WML and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each Client hereby consents to personal
jurisdiction and to service and venue in any court in which any claim which is
subject to this Agreement is brought against WML or any other Indemnified
Person.
It is understood that, in connection with WML's engagement, WML may
also be engaged to act for any Client in one or more additional capacities, and
that the terms of this engagement or any such additional engagement may be
embodied in one or more separate written agreements. This indemnification shall
apply to the engagement specified in the first paragraph hereof as well as to
any such additional engagement(s) (whether written or oral) and any
modification of said engagement or such additional engagement(s) and shall
remain in full force and effect following the completion or termination of said
engagement or such additional engagement(s).
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Each Client further understands that if WML is asked to furnish any
Client a financial opinion letter or act for any Client in any other formal
capacity, such further action may be subject to a separate agreement containing
provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the performance of the
services hereunder, WML shall not divulge any confidential information, secret
processes, or trade secrets disclosed by any Client to it solely in its
capacity as a financial advisor, unless the applicable Client consents to the
divulging thereof or such information, secret processes, or trade secrets are
publicly available or otherwise available to WML without restriction or breach
of any confidentiality agreement or unless required by any governmental
authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned
(other than in respect of the rights and obligations of WML, which may be
assigned to any one or more of its principals or affiliates) by any of the
parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Entire Agreement. All discussions, understandings, and agreements
theretofore made between any of the parties hereto in respect of the subject
matter hereof are merged in this Agreement, which alone fully and completely
expresses the agreement of the parties hereto.
11. Construction. Unless the context otherwise requires, (i) all
references to Sections contained in this Agreement are references to Sections
of this Agreement, (ii) words in the singular shall include the plural and vice
versa, (iii) words of any gender shall include each other gender, (iv)
"include," "including," and their derivatives shall mean "including without
limitation"; and (v) "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
association, or other form of business or legal entity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
WINGATE MANAGEMENT LIMITED, L.L.C.
By: /s/ FREDERICK B. HEGI, JR.
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Name: Frederick B. Hegi, Jr.
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Title: Manager
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KEVCO, INC.
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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KEVCO MANAGEMENT, INC.
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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KEVCO HOLDINGS, INC.
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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KEVCO GP, INC.
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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KEVCO COMPONENTS, INC.
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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DCM DELAWARE, INC.
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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KEVCO MANUFACTURING, L.P.
By: Kevco GP, Inc.,
its General Partner
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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KEVCO DISTRIBUTION, L.P.
By: Kevco GP, Inc.,
its General Partner
By: /s/ JERRY E. KIMMEL
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Name: Jerry E. Kimmel
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Title: President
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