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EXHIBIT 10.4
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS WARRANT WERE PURCHASED PURSUANT TO THE
SECURITIES PURCHASE AGREEMENT DATED AS OF JULY 14,
1999, BETWEEN KEVCO, INC. AND ▇▇▇▇▇▇▇ PARTNERS II, L.P.
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 LAWS AND
SECTION 3 OF THIS WARRANT.
No. of Nonvoting Shares: 772,727 Shares Warrant No. 26
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WARRANT
To purchase Nonvoting Common Stock of
KEVCO, INC.
July 26, 1999
THIS WARRANT CERTIFIES THAT, for value received, the
registered holder hereof, The Kevco Partners Investment Trust, a Delaware
business trust, or its registered assigns, is entitled to purchase from Kevco,
Inc., a Texas corporation (the "Company"), at any time and from time to time
after the date hereof (the "Initial Issue Date") and on or before 5:00 p.m.
Central Time, on the Expiration Date (as hereinafter defined) 772,727 shares of
the Nonvoting Common Stock (as hereinafter defined) at the Basic Purchase Price
(as hereinafter defined), subject to the terms, conditions, and adjustments as
hereinafter provided in Section 6.
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. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by," and "under common control
with"), as used in respect of any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement, or otherwise.
"Amendment" shall mean the Amendment to the Company's
Articles of Incorporation required by the Purchase Agreement to create the
Nonvoting Common Stock, a
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class of preferred stock designated "Series A 103/8% Convertible Pay-in-Kind
Voting Preferred Stock" and a class of preferred stock designated "Series B
103/8% Convertible Pay-in-Kind Nonvoting Preferred Stock" (collectively, the
"Convertible Preferred Stock").
"Basic Purchase Price" shall mean the price of $5.50 per
share of the Nonvoting 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.
"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, par value
$.01 per share, of the Company ("Voting Common Stock"), and, after the adoption
of the Amendment 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 and in respect of the Purchase Agreement and the documents and
instruments executed in connection with the Purchase Agreement and the
transactions contemplated thereby 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.
"Fully-Diluted Common Stock" shall mean, at any time, the
then outstanding shares of Common Stock of the Company plus (without
duplication) all shares of Common Stock issuable, whether at such time or upon
passage of time or the occurrence of future events, upon the exercise,
conversion, or exchange of all then-outstanding Common Stock Equivalents
(including, for purposes of such calculation, "phantom" shares of equivalent
value to any stock appreciation or equivalent equity-based payment right).
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"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, together with the registered holder(s) of any Warrant
Shares into which this Warrant (or any subsequent Warrant) is subsequently
converted.
"Independent Directors" shall mean any director of the
Company not affiliated with ▇▇▇▇▇▇▇ or its assigns or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and who
does not have any other relationship (including any relationship, contractual
or otherwise, with ▇▇▇▇▇▇▇, its assigns or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇) that would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.
"Kimmel Designees" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, if he is a
director of the Company, and any other director of the Company elected or
appointed at the designation of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"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 Voting 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 Special Committee 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.
"NASDAQ" shall mean the NASDAQ Stock Market.
"Notes" shall mean collectively the $17.0 million and $6.5
million principal amount Series A and Series B Senior Subordinated Convertible
Exchangeable Notes issued by the Company pursuant to the Purchase Agreement.
"Other Warrants" shall mean collectively the warrant to
acquire 675,000 shares of Nonvoting Common Stock and the warrant to acquire
295,455 shares of Nonvoting Common Stock.
"Person" shall mean any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
organization, or other entity.
"Plans" shall mean any plan existing on the date hereof or
adopted by the Company after the date hereof providing for the issuance of
Common Stock or other options or rights to purchase stock, warrants or other
securities.
"Preferred Stock" shall mean collectively the Company's (i)
Series A 10 3/8% Convertible Pay-in-Kind Voting Preferred Stock, par value
$0.01 per share, and (ii) Series B 10 3/8% Convertible Pay-in-Kind Nonvoting
Preferred Stock, par value $0.01 per share.
"Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of July 14, 1999, by and between the Company and
▇▇▇▇▇▇▇.
"Purchase Price" shall mean, as of any date, the Basic
Purchase Price as adjusted pursuant to Section 6.
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"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.
"Special Committee" shall mean a committee of the Board of
Directors composed solely of the Independent Directors and the Kimmel Designees
then in office; provided, however, that such committee shall be constituted
such that a majority of its members shall always be Independent Directors.
"Subsidiary" shall mean, with respect to any Person, any
other Person at least a majority of whose outstanding shares of capital stock
or other equity interests (having ordinary voting power for the election of
directors or comparable managers of such other Person) are owned, directly or
indirectly, by that Person.
"Trading Day" shall mean any day on which NADSAQ is open for
trading, or if the shares of Voting 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 Voting 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.
"▇▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇ Partners II, L.P., a Delaware limited
partnership.
Section 2. Ownership of this Warrant.
(a) Ownership. The Company 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 the Company, 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. The Company shall maintain, 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 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 any Holder shall by notice request
the same, the Company will deliver to such Holder a certificate, signed by one
of its authorized officers, listing the name and address of every other Holder
of Warrants of this series, as such information appears in such register and in
the stock transfer books of the Company at the close of business on the day
before such certificate is signed.
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(b) Term. This Warrant shall be void after 5:00 p.m. Central Time on
the Expiration Date.
Section 3. Exchange, Transfer and Replacement.
(a) Exchange. This Warrant is exchangeable, upon the surrender hereof
by the registered Holder to the Company at its 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 Nonvoting Common Stock
purchasable hereunder or in the aggregate with any other Warrants tendered
herewith, each of such new Warrants to represent the right to purchase such
number of shares of the Nonvoting Common Stock as shall be designated by said
registered Holder at the time of such surrender, not to exceed the aggregate
shares of Nonvoting 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, of the same tenor as this Warrant but registered in the name of the
transferee, upon surrender of this Warrant with the assignment 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 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 the Company at its office or agency
provided for in Section 2 of evidence reasonably satisfactory to it 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
it, and upon surrender of this Warrant, if mutilated, the Company will make and
deliver a new Warrant of like tenor, in replacement of this Warrant; provided
that, if ▇▇▇▇▇▇▇, Armbuck & Co., H C Crown Corp. or any of their respective
Affiliates shall be the registered holder hereof, an agreement of indemnity (in
form reasonably satisfactory to the Company) 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 the Company upon the surrender hereof in connection with any exchange,
transfer or replacement pursuant to this Section 3. The Company shall pay all
taxes and other expenses and charges payable in connection with the
preparation, execution and delivery of Warrants pursuant to this Section 3,
excluding, however, any thereof imposed on or measured by the overall net
income of the Holder of this Warrant or any other Person by any jurisdiction in
which such Holder or such other Person is located.
(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):
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS WARRANT WERE PURCHASED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT DATED
AS OF JULY 14, 1999, BETWEEN KEVCO, INC. AND ▇▇▇▇▇▇▇ PARTNERS II, L.P. 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) Procedure for Exercise.
(i) 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 the Company at its office or agency provided for
in Section 2 such subscription form, this Warrant and the aggregate Purchase
Price of the shares of the Nonvoting 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.
(ii) Such Purchase Price shall be paid to the Company in lawful
money of the United States by company check of ▇▇▇▇▇▇▇ or an Affiliate of
▇▇▇▇▇▇▇, or, if the Holder is other than ▇▇▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇▇▇, by
certified check drawn as a banking institution chartered by the government of
the United States or any state thereof or wire transfer of funds.
(iii) The exercise of this Warrant shall be deemed to have been
effected and the Purchase Price and the number of shares of the Nonvoting
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 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, issue such shares of Nonvoting Common Stock and execute or
cause to be executed and delivered to the registered Holder hereof a
certificate or certificates representing the aggregate number of shares of the
Nonvoting Common Stock specified in such form. The Holder shall be deemed to be
a shareholder of the Company for all purposes upon receipt of such form and
other items, notwithstanding the fact that certificates representing such
Nonvoting Common Stock have not been issued. If this Warrant shall have been
exercised only in part, the Company shall, at its expense at the time of
delivery of such stock certificate or certificates, deliver to the registered
Holder hereof a new Warrant evidencing the rights of such Holder to purchase
the remaining shares of the Nonvoting Common Stock covered by this Warrant. The
Company shall pay all taxes (other than any taxes imposed on or measured by the
overall net income of such Holder in any jurisdiction in which such Holder is
located) and other expenses and charges payable in
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connection with the preparation, execution and delivery of stock certificates
pursuant to this Section 4.
(b) Character of Warrant Shares. All shares of the Nonvoting Common
Stock issuable upon the exercise of this Warrant shall, when issued and paid
for in accordance with such Warrant, be duly authorized, validly issued, fully
paid, and nonassessable.
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 6.
(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 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, then in each case from and after the record date for
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 shall be correspondingly decreased.
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(c) Other Issues. Upon any issuance by the Company 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 to equal the following
amount:
[(D x E) + F]
G x -------------
C x E
where C equals the number of shares of Common Stock to be outstanding
immediately after such additional issuance, D equals the number of shares of
Common Stock outstanding immediately 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 on or after the Initial Issue Date of options,
warrants, 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 other than the Market
Price in effect immediately prior to the issuance of such options, warrants,
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), 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, warrant, or right shall be considered to have been delivered
at the time such option, warrant, or right was issued, for a consideration
equal to the minimum purchase price per share of Common Stock provided for in
such option, warrant, or right plus the consideration, if any, received by the
Company for such option, warrant, 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 or rights
shall be considered to have been delivered at the time of issuance of such
securities or rights, for a consideration equal to the consideration received
by the Company for such securities or rights (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 or rights;
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(iii) If the purchase or conversion price provided for in any
options, warrants, or rights referred to above, the additional consideration,
if any, payable upon the conversion or exchange of convertible securities or
rights referred to above, or the rate at which any convertible securities or
rights 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
Nonvoting 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 Nonvoting Common Stock purchasable upon the exercise of
this Warrant) which would have been in effect at such time had such rights,
options, warrants, 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 option, warrant, or
right referred to above, the additional consideration, if any, payable upon the
conversion or exchange of convertible securities or rights referred to above,
or the rate at which any convertible securities or rights 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 option,
warrant, or right or upon conversion or exchange of any such convertible
security or rights, 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 option,
warrant, right, 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, warrants, 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,
warrants, rights, or securities (or upon the occurrence of any event with
respect thereto specified in the immediately preceding subsection (iii)) been
made without reference to the number of shares of Common Stock subject to such
terminated or expired options, warrants, rights, or securities. 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, the Company 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 other property
(including cash) which such Holder would have received (together with all
subsequent dividends and distributions thereon) if such Holder had exercised or
converted this Warrant on the record date fixed in connection with such
dividend or distribution, and the Company shall take whatever steps are
necessary or
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appropriate to keep in reserve at all times any securities and other properties
which are required to fulfill such obligations of the Company. 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). 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 Nonvoting 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
receive, or to elect to receive, Voting Common Stock pursuant to this
subsection 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, an equivalent
number of 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, in lieu of any subsection (d) adjustment in respect of
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 Nonvoting 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) Additional Adjustments.
(i) If at any time or from time to time conditions arise by
reason of action taken by the Company which are not adequately covered by the
provisions of this Section 6, and which might materially and adversely affect
the exercise rights of the Holders of Warrants, upon the request of a majority
in interest of the Holders the Company shall appoint a firm of independent
certified public accountants of recognized national standing (which may be the
regular auditors of the Company), which shall give their opinion upon the
adjustment, if any, of the number of Warrant Shares purchasable upon the
exercise of the Warrants, on a basis consistent with the standards established
in the other provisions of this Section 6 and assuming all other adjustments
required pursuant to this Section 6 have been made, necessary in order to
preserve without diminution the rights of the holders of the Warrants. Upon
receipt of such opinion, the Board of Directors of the Company shall forthwith
make the adjustments described therein.
(ii) Notwithstanding any other provision hereof, any antidilution
adjustments made pursuant to the terms hereof or of the Notes, the Other
Warrants, or the
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Preferred Stock shall be deemed to be made to all warrants held by the Holders
or their Affiliates in this series simultaneously, the intention being to avoid
any iterative calculations.
(g) 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 Nonvoting Common
Stock shall be entitled to receive stock, securities, or assets (including
cash) of the Company or another Person with respect to or in exchange for
Nonvoting Common Stock (each such transaction being hereinafter referred to as
a "Transaction"), then, as a condition of the consummation of each Transaction,
lawful and adequate provisions shall then be made so that each Holder, upon the
exercise hereof at any time after the consummation of such Transaction, shall
be entitled to receive, and such Warrants shall thereafter represent the right
to receive, in lieu of the Nonvoting Common Stock issuable upon exercise or
conversion hereof 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 Transaction as nearly
equivalent as possible to the adjustments provided for in this Section 6). The
Company shall not effect any Transaction unless prior to the consummation
thereof each Person (other than the Company) which may be required to deliver
any securities or other property upon the exercise of the Warrants as provided
herein shall assume, by written instrument delivered to each registered Holder
of the Warrants in form and substance reasonably satisfactory to a majority in
interest of the Holders, the obligation to continue to honor this Warrant and
to deliver to such Holder such securities or other property to which, in
accordance with the foregoing provisions, such Holder may be entitled, and such
Person shall have similarly delivered to each registered Holder an opinion of
counsel for such Person, in substance and from such counsel as is acceptable to
the Holders, stating that all the outstanding Warrants shall thereafter
continue in full force and effect and shall be enforceable against such Person
in accordance with the terms hereof and thereof.
(h) 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 as soon as practicable give
written notice ("Notice of Adjustment") to the registered Holder(s) of this
Warrant: (i) describing the event; (ii) stating the adjusted Purchase Price,
the number of Warrant Shares issuable based upon the difference between the
Purchase Price before and after such adjustment; 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.
(i) Accountant's Opinion. Upon each 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, then and in each such
case, upon the reasonable written request of 50% in interest of the registered
Holders of Warrants in this series given to the Company within thirty (30) days
after the Company has given Notice of Adjustment, the Company will promptly
obtain an opinion of independent certified public accountants selected by the
Company and reasonably satisfactory to such Holder(s), stating the adjusted
Purchase Price and the new
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number of Warrant Shares so issuable, or specifying the other shares of stock,
securities, or assets and the amount thereof receivable as a result of such
adjustment or change in rights, and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Company will promptly mail a copy of such accountant's opinion to the
registered Holder of this Warrant. The costs of the accountant's opinion shall
be borne (i) by the Company, if the accountant's opinion reflects any change to
the adjusted Purchase Price or the number of Warrant Shares so issuable set
forth in the Notice of Adjustment, or (ii) by the Holders, if the accountant's
opinion reflects no change to the adjusted Purchase Price or the number of
Warrant Shares so issuable set forth in the Notice of Adjustment. Any dispute
or controversy in respect of the accountant's opinion shall be submitted to
final and binding arbitration in Dallas, Texas pursuant to the rules of the
American Arbitration Association. All costs and expenses (including reasonable
attorneys' fees) incurred by the Company and the Holders in connection with any
such arbitration proceeding shall be paid by the non-prevailing party (as
determined by the arbitrator(s)).
(j) Adjustment of Less Than $.01. The Company shall not be required to
give notice of any adjustment of the Purchase Price in accordance with
subsection (h) above if the amount of such adjustment shall be less than $.01,
but in such case any such adjustment shall be carried forward and notice
thereof shall be given at the time of and together with the next subsequent
adjustment, which, together with any adjustment so carried forward, shall
amount to not less than $.01 per share; provided, however, that notice of each
such adjustment of the Purchase Price shall be given not later than three years
from the date such adjustment would have been required to be made except for
the provisions of this subsection (j).
(k) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company or any of its subsidiaries, but the disposition of any such
shares to a third party shall be considered an issue or sale of Common Stock
for the purposes of this Section 6.
(l) 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 (i) the
issuance of any Warrants, (ii) the issuance of any Warrant Shares, (iii) the
granting of any warrant concurrently with the granting of this Warrant,
including warrants granted under the Purchase Agreement, (iv) the issuance of
any shares of Common Stock upon the exercise of any warrant granted
concurrently with the granting of this Warrant, including warrants granted
under the Purchase Agreement, (v) the issuance of any Convertible Preferred
Stock by the Company in lieu of paying cash interest on the Notes, (vi) the
issuance of any shares of Common Stock upon the exchange of the Notes or
conversion of any Convertible Preferred Stock issued in lieu of cash interest
on the Notes or in exchange for the Notes, (vii) the issuance of rights to
acquire shares of Common Stock as a result of any antidilution adjustments in
any of the foregoing, (viii) the issuance of any shares of Common Stock or
other options or rights to purchase stock, warrants, other securities pursuant
to a Plan, and (ix) the issuance of shares of Common Stock or rights to acquire
Common Stock in connection with any redemption pursuant to Article 3 of either
of the Notes or in connection with any redemption of Preferred Stock.
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Section 7. Special Agreements of the Company. The Company covenants
and agrees that:
(a) Will Reserve Shares. The Company will authorize, reserve and set
apart and have available solely for issuance and delivery upon exercise at all
times, free from preemptive rights, those shares of the Nonvoting Common Stock
or other securities which are deliverable upon the exercise of the Warrants,
and the Company will have at all times all other rights or privileges necessary
to enable it at any time to fulfill all its obligations hereunder.
(b) Will Avoid Certain Actions. The Company will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, issue or sale of securities or otherwise, avoid
or take any action which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed hereunder by the
Company (including, without limitation, by way of amending, altering,
modifying, or repealing any provision of the Company's Articles of
Incorporation in any manner which adversely affects the relative rights,
preferences, qualifications, powers, limitations or restrictions of the
Nonvoting Common Stock), but will at all times in good faith assist in carrying
out all of the Company's obligations pursuant to the provisions of this Warrant
and in taking all such action as may be necessary or appropriate in order to
protect the rights of the registered holder of this Warrant against dilution or
other impairment, and, in particular, will not permit the par value, if any, of
any share of the Nonvoting Common Stock to be or become greater than the then
effective Purchase Price.
(c) Will List on Securities Exchange. If and so long as the Common
Stock is listed on any national securities exchange (as defined in the Exchange
Act) or automatic quotation system, the Company will, at its expense, use its
reasonable best efforts to obtain and maintain the approval for listing on each
such exchange upon official notice of issuance of all shares of the Nonvoting
Common Stock receivable upon the exercise of the Warrants at the time
outstanding and in any event will use its reasonable best efforts to obtain and
maintain the listing of such shares after their issuance; and the Company will
so list on such national securities exchange or automatic quotation system, to
register under the Exchange Act (and any similar state statute then in effect),
and to maintain such listing of, any other securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities
of the same class shall be listed on such national securities exchange by the
Company.
(d) Will Bind Successors. This Warrant will be binding upon any Person
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
Section 8. 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 Voting Common Stock and/or Nonvoting Common Stock of any
additional shares of stock of any class or other rights;
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(c) the Board of Directors of the Company shall authorize (whether
definitively or subject to any conditions) any capital reorganization of the
Company, any reclassification of the capital stock of the Company, any
statutory exchange 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 shall give notice thereof
to each registered Holder of Warrants or Warrant Shares, 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 8 shall also specify the date
as of which the holders of record of the Voting Common Stock and/or Nonvoting
Common Stock shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Voting Common Stock and/or
Nonvoting Common Stock for securities or other property deliverable upon such
reorganization, reclassification, statutory exchange, 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 8(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 shareholders, if either is required.
Section 9. 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 Warrant Shares, 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 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.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
The Kevco Partners Investment Trust
c/o Wingate Partners II, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
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 10. 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. No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of the Nonvoting 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 11. 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 12. 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 court
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or governmental agency or authority, or (iii) is furnished to purchasers or
prospective purchasers hereof (exclusive of any Person who 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 13. Miscellaneous. Unless otherwise expressly provided herein
or unless the registered Holder hereof otherwise consents in writing, all
financial statements and reports furnished 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 applied on a
consistent basis. 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, Kevco, Inc. has caused this Warrant to be
signed and delivered by its duly authorized officer, attested by its duly
authorized officer, and to be dated as of July 26, 1999.
Kevco, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
ATTEST:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
and Chief Operating Officer
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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 Nonvoting 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
-------------------------------
19
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 Nonvoting 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:
-------------------------