JOINT FUNDING AGREEMENT
Exhibit 10
This Joint Funding Agreement (this “Agreement”), dated as of July 2, 2008, is entered
into by and among LKCM Private Discipline Master Fund, SPC, a segregated portfolio company
organized under the laws of the Cayman Islands (“LKCM”), CPFW Holdings, L.P., a Delaware
limited partnership (“CPFW”), and the other investors that are signatories hereto (the
“Investors”). LKCM and CPFW are collectively referred to herein as the “Sponsors”.
The Sponsors and the Investors are collectively referred to herein as the “Parties” and
each of such entities is referred to herein as a “Party”.
RECITALS
Eiger Holdco, LLC, a Delaware limited liability company and wholly-owned subsidiary of LKCM
(“Parent”), Eiger Merger Corporation, a Delaware corporation and wholly-owned subsidiary of
Parent (“Merger Sub”), and Industrial Distribution Group, Inc., a Delaware corporation (the
“Company”) have entered into an Agreement and Plan of Merger, dated April 25, 2008 (the
“Merger Agreement”), pursuant to which Merger Sub will merge into the Company and Parent
will acquire all of the Company’s outstanding shares of common stock and securities convertible
into or exchangeable for shares of capital stock of the Company on the basis of a price of $12.10
per share of common stock (the “Merger”). Capitalized terms used in this Agreement without
definition have the respective meanings given to them in the Merger Agreement.
The Parties desire to provide the equity funding necessary to consummate the Merger in
exchange for limited liability company interests in Parent. The Parties desire to set forth in
this Agreement their agreement with respect to the transactions contemplated by the Merger
Agreement and the equity funding of Parent.
The Parties, intending to be legally bound, hereby agree as follows:
1. Funding; Issuance of LLC Interests.
(a) The Sponsors may collectively cause Parent and/or Merger Sub to take, omit from taking, or
refrain from taking, any action in connection with the Merger, the Merger Agreement and the
transactions contemplated thereby, including, without limitation, (i) amending or terminating the
Merger Agreement, (ii) determining whether the closing conditions set forth in the Merger Agreement
have been satisfied, or whether they should be waived, (iii) amending or terminating the commitment
letter with respect to the proposed debt financing of the Company and (iv) negotiating and
entering into arrangements with the Company’s management. Upon the determination by the Sponsors
that the conditions to the closing of the Merger (the “Closing”) contained in the Merger
Agreement have been satisfied or waived (subject to those conditions which by their nature are
satisfied only at the Closing), LKCM shall give notice of such determination to the Parties and on
the Business Day immediately prior to the scheduled date of Closing each of the Parties shall
contribute to Parent by wire transfer of immediately available funds the amount set forth opposite
such Party’s name on Schedule I attached hereto (as such Schedule may be amended or
supplemented from time to time, the “Funding Commitment”).
(b) If the Sponsors shall determine that Parent has become obligated to pay to the Company the
Parent Termination Fee and an amount equal to the Platinum Fee paid by the Company pursuant to
Section 8.03(e) of the Merger Agreement (collectively, the “Reverse Termination Fees”),
LKCM shall give notice of such determination to the Parties and on the first Business Day following
such notice each of the Parties shall contribute to Parent by wire transfer of immediately
available funds an amount equal to the product of (x) such Party’s Commitment Percentage (as set
forth in Schedule I attached hereto) and (y) the amount determined by the Sponsors (as set
forth in LKCM’s notice) to be payable by Parent to the Company; provided, however,
that if the obligation of Parent to pay the Reverse Termination Fees arose as a result of any
breach by a Party of its representations, warranties or covenants hereunder, including, without
limitation, that Party’s failure to fund its Funding Commitment as contemplated by Section 1(a),
then that Party shall indemnify and hold harmless each other Party from and against any damages, losses and expenses they incur (including their respective
portions of the Reverse Termination Fees and attorneys’ fees and expenses) as a result of such
breach.
(c) If Parent receives the Company Termination Fee pursuant to Section 8.03(c) of the Merger
Agreement, the amount remaining after payment or provision for payment of all expenses incurred by
or on behalf of Parent in connection with the Merger Agreement and the transactions contemplated
thereby (as determined by the Sponsors) shall be distributed to the Parties based on the Commitment
Percentages of the Parties.
(d) The obligations of each Party under Sections 1(a) and 1(b) are several and not joint; no
Party shall have any obligation with respect to amounts to be contributed by other Parties except
as expressly set forth herein.
(e) On or prior to the Closing, the Parties and Parent will enter into an Amended and Restated
Limited Liability Agreement of Parent (“LLC Agreement”) containing the terms set forth on
Schedule II hereto and such other terms to be mutually agreed upon by the Sponsors and at
the Closing, limited liability company interests shall be issued to the Parties in exchange for
their respective contributions in accordance with the LLC Agreement.
2. Exclusivity. Each Party (other than LKCM) acknowledges and agrees that it has been
introduced to the Company and the Merger by LKCM and agrees that for one year after the date of
this Agreement it will work exclusively with LKCM with respect to the Merger and will not, and will
direct its agents and representatives not to, except as contemplated by this Agreement, consummate,
make any proposal with respect to, or solicit, negotiate or entertain any inquiries or proposals
with or from any third party regarding, a potential merger, acquisition, recapitalization,
refinancing, investment, partnership, joint venture or other potential strategic transaction with,
in or involving the Company, in each case however structured.
3. Approval Rights; Withdrawal; and Additional Investors.
(a) Subject to Sections 3(d) and (e) below, all determinations, calculations, approvals, and
other similar matters that are required to be made or that are advisable to be made under this
Agreement or the Merger Agreement shall require the concurrence of the Sponsors. Notwithstanding
the foregoing, if a Party does not consent to (i) any increase in the price per share of common
stock of the Company payable pursuant to the Merger, or (ii) any change in the structure of the
Merger (as described in the Merger Agreement) that would have a material adverse tax impact on any
Party, such Party may withdraw (a ''Withdrawing Party”) from participation in accordance
with the terms of this Agreement.
(b) A Withdrawing Party shall remain subject to Sections 2 and 8 of this Agreement,
notwithstanding its withdrawal therefrom. A Withdrawing Party shall be relieved of any other
obligations hereunder.
(c) If a Party withdraws from participation in accordance with this Agreement, the remaining
Parties may elect to assume all or part of the Withdrawing Party’s Funding Commitment or may agree
to replace the Withdrawing Party with another person or entity (a “Replacement Party”);
provided that such Replacement Party executes a joinder to this Agreement in form and
substance reasonably satisfactory to the Sponsors (and Schedule I of this Agreement shall
be modified to reflect such Replacement Party’s assumption and such Replacement Party shall become
an “Investor” for purposes hereof).
(d) LKCM shall have the right, in its sole and exclusive discretion and without the approval
of any other Party, to join one or more of its affiliates to this Agreement (a “LKCM Affiliated
Party,” and collectively with LKCM, the “LKCM Affiliated Group”) and allocate its
Funding Commitment, in whole or in part, to such LKCM Affiliated Parties. LKCM shall also have the
right, in its sole and exclusive discretion and without the approval of any other Party, to join
one or more additional persons or entities to this Agreement (a “LKCM Additional Party,”
and collectively with any LKCM Affiliated Parties, the “LKCM Funding Parties”) and allocate
its Funding Commitment, in whole or in part, to such LKCM Additional Parties; provided,
however, that (i) the LKCM Affiliated Group shall not reduce its aggregate Funding
Commitment to an amount that is less than $25 million
without the prior written consent of CPFW, (ii) each LKCM Additional Party shall be reasonably
acceptable to the Sponsors, and (iii) LKCM shall remain liable for the obligations of any LKCM
Funding Party who defaults on its obligations under Sections 1(a), 1(b) and 5 of this Agreement;
and provided, further, that any such LKCM Funding Parties shall execute a joinder
to this Agreement in form and substance reasonably satisfactory to the Sponsors (and Schedule
I of this Agreement shall be modified to reflect any such LKCM Funding Party’s joinder and such
LKCM Funding Party shall become an “Investor” for purposes hereof). If the LKCM Affiliated Group
shall reduce its aggregate Funding Commitment to an amount that is less than $25 million, LKCM
shall no longer be deemed a “Sponsor” for purposes of this Agreement and shall have no consent or
other rights under this Agreement not generally made available to the other Parties.
(e) CPFW shall have the right, in its sole and exclusive discretion and without the approval
of any other Party, to join one or more of its affiliates to this Agreement (a “CPFW Affiliated
Party,” and collectively with CPFW, the “CPFW Affiliated Group”). CPFW shall also have
the right, in its sole and exclusive discretion and without the approval of any other Party, to
join one or more additional persons or entities to this Agreement (a “CPFW Additional
Party,” and collectively with any CPFW Affiliated Parties, the “CPFW Funding Parties”)
and allocate its Funding Commitment, in whole or in part, to such CPFW Additional Parties;
provided, however, that (i) the CPFW Affiliated Group shall not reduce its
aggregate Funding Commitment to an amount that is less than $15 million without the prior written
consent of LKCM, (ii) each CPFW Additional Party shall be reasonably acceptable to the Sponsors,
and (iii) CPFW shall remain liable for the obligations of any CPFW Funding Party who defaults on
its obligations under Sections 1(a). 1(b) and 5 of this Agreement; and provided,
further, that any such CPFW Funding Parties shall execute a joinder to this Agreement in
form and substance reasonably satisfactory to the Sponsors (and Schedule I of this
Agreement shall be modified to reflect any such CPFW Funding Party’s joinder and such CPFW Funding
Party shall become an “Investor” for purposes hereof). If the CPFW Affiliated Group shall reduce
its aggregate Funding Commitment to an amount that is less than $15 million, CPFW shall no longer
be deemed a “Sponsor” for purposes of this Agreement and shall have no consent or other rights
under this Agreement not generally made available to other Parties.
(f) Notwithstanding any provision in Sections 3(d) and 3(e) to the contrary, LKCM and CPFW
agree that they will use reasonable efforts to coordinate their efforts to sell down a portion of
their respective Funding Commitments to additional persons and entities and that any commitments by
such persons or entities (other than any LKCM Affiliated Parties or any CPFW Affiliated Parties)
identified by them will be allocated to reduce their respective Funding Commitments pro rata based
on the respective Commitment Percentages of the LKCM Affiliated Group and the CPFW Affiliated
Group.
4. Merger Advisors. The Parties acknowledge that LKCM may, with the consent of CPFW
(which consent shall not be unreasonably withheld), engage (or cause Parent to engage) such
consultants, advisors and representatives (collectively, the “Merger Advisors”) as it deems
reasonably necessary from time to time in connection with the Merger Agreement and the transactions
contemplated thereby. The Parties hereby acknowledge and agree that Xxxx Xxxxxxx LLP and Xxxxxxx &
Marsal Transaction Advisory Group, LLC shall be deemed “Merger Advisors” for purposes of this
Agreement.
5. Costs and Expenses. In the event (i) the Merger is consummated, (ii) the Merger
Agreement is terminated under circumstances such that Parent receives the Company Termination Fee
upon such termination, or (iii) the Merger Agreement is terminated under circumstances such that
Parent is required to pay the Parent Termination Fee and an amount equal to the Platinum Fee paid
by the Company, then all costs, expenses and other obligations incurred by or on behalf of LKCM,
CPFW or Parent in connection with the Merger Agreement and the transactions contemplated thereby
(the “Shared Expenses”) shall be borne by the Parties in accordance with their respective
Commitment Percentages, including, but not limited to, (a) the fees, expenses and other obligations
due to the Merger Advisors relating to their engagement and (b) any fees, expense reimbursement and
other amounts payable under any debt financing or other financing arrangements entered into by or
on behalf of Parent, Merger Sub, or the Company in connection with the Merger.
6. Representations and Warranties of the Parties. As an inducement to the other
Parties to enter into this Agreement, each Party hereby represents and warrants to the other
Parties as follows:
(a) Organization, Authority and Qualification of the Party. Such Party is duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by such Party, the performance by such Party
of its obligations hereunder and the consummation by such Party of the transactions contemplated
hereby have been duly authorized by all requisite action on the part of such Party. This Agreement
has been duly executed and delivered by such Party, and (assuming due authorization, execution and
delivery by the other Parties) this Agreement constitutes a legal, valid and binding obligation of
such Party enforceable against such Party in accordance with its terms.
(b) No Conflict. The execution, delivery and performance of this Agreement by such
Party do not and will not (a) violate, conflict with or result in the breach of any provision of
the organizational documents of such Party, (b) conflict with or violate any law or governmental
order applicable to such Party or any of its assets, properties or businesses or (c) conflict with,
result in any breach of, constitute a default (or an event which with the giving of notice or lapse
of time, or both, would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or
result in the creation of any encumbrance on any of the assets or properties of such Party pursuant
to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which such Party is a party or by which any of such
assets or properties is bound or affected, which, in any such case, would have a material adverse
effect on the ability of such Party to consummate the transactions contemplated by this Agreement.
(c) No Side Agreements, Etc. Such Party has not entered into and will not enter into
any other agreements, contracts or understandings with Parent, Merger Sub or the Company prior to
or concurrent with the Closing which will confer any economic benefit on it that (i) is not
contemplated by this Agreement or (ii) shared on a pro rata basis with the other Parties to this
Agreement.
7. Payment Obligations. In the event that any Party fails to make any payment
required by this Agreement, including the requirement to fund such Party’s Funding Commitment
pursuant to Section 1 and pay such Party’s portion of the Reverse Termination Fees and Shared
Expenses, each of the other Parties shall be entitled to directly enforce and recover from such
defaulting Party any and all claims, losses, damages, liabilities, obligations, judgments, fines,
amounts paid in and costs of settlement and expenses, including reasonable legal fees and expenses
incurred by such Party, payable promptly upon written request, to the extent arising or resulting
from or relating to such defaulting Party’s failure to make the payments required under this
Agreement.
8. Confidentiality. Except to the extent required by law or regulation, none of the
Parties shall, without the prior written consent of the Sponsors, disclose the existence or terms
of this Agreement, or the fact that discussions or negotiations are taking place with LKCM or with
the Company regarding the Merger, to any person or to the public (other than to its own officers,
directors, employees, advisors, attorneys, accountants and representatives). In the event that any
such disclosure is required by law or regulation, the Party required to make such disclosure shall
coordinate the required disclosure with the Sponsors to the extent practicable, and if applicable,
seek to obtain the confidential treatment thereof.
9. Term and Termination. This Agreement shall remain in effect until the earliest to
occur of (i) termination of the Merger Agreement; (ii) the execution of an LLC Agreement that
expressly supersedes this Agreement; or (iii) the date, if any, on which the Sponsors agree in
writing to terminate this Agreement. Notwithstanding such termination, the provisions of Sections
1(b), 1(c), 2, 5 and 7-18 shall survive such termination and each Party shall remain liable for any
breach hereunder prior to such termination.
10. Relationship of Parties. This Agreement shall not be construed to create as among
the Parties an association, trust, partnership, joint venture, association taxable as a corporation
or other entity for the conduct of any business for profit, or impose a trust or partnership duty,
obligation or liability on or with regard to, any other Party, nor shall any Party have the right
or authority to assume, create or incur any liability or obligation, express or implied, in the
name of, or on behalf of the other Party, without the prior written consent of such other Party
except as otherwise expressly set forth herein.
11. Choice of Law; Consent to Jurisdiction and Waiver of Jury Trial.
(a) This Agreement and all claims arising out of or relating to this Agreement and the Merger
contemplated hereby shall be governed by the laws of the State of Delaware without regard to the
conflicts of law principles that would result in the application of any law other than the law of
the State of Delaware.
(b) Each of the Parties irrevocably submits to the exclusive jurisdiction of (i) the Chancery
Court of the State of Delaware or, if the Chancery Court does not have jurisdiction, the other
courts of the State of Delaware and (ii) the United States District Court for the District of
Delaware for the purposes of any suit, action or other proceeding arising out of or relating to
this Agreement or any matter contemplated hereby (and agrees not to commence any action, suit or
proceeding relating hereto except in such courts). Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit or proceeding
arising out of or relating to this Agreement or the matter contemplated hereby in (i) the Chancery
Court of the State of Delaware or, if the Chancery Court does not have jurisdiction, the other
courts of the State of Delaware or (ii) the United States District Court for the District of
Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum. Notwithstanding the foregoing, each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on
the judgment in any jurisdiction or in any other manner provided in law or in equity.
(c) EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE MERGER CONTEMPLATED BY THIS AGREEMENT OR THE ACTIONS OF THE PARTIES
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
12. Notices. All notices and other communications required or permitted to be given
by any provision of this Agreement shall be in writing and mailed (certified or registered mail,
postage prepaid, return receipt requested) or sent by hand or overnight courier, or by facsimile
transmission (with acknowledgment received), charges prepaid and addressed to the intended
recipient at the address below, or to such other addresses or numbers as may be specified by a
Party from time to time by like notice to the other Parties. All notices and other communications
given in accordance with the provisions of this Agreement shall be deemed to have been given and
received when delivered by hand or transmitted by facsimile (with acknowledgment received),
immediately, if evidence of successful facsimile transmission or three (3) business days after the
same are sent by certified or registered mail, postage prepaid, return receipt requested or one (1)
business day after the same are sent by a reliable overnight courier service, with acknowledgment
of receipt.
If to LKCM:
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
If to CPFW:
000 Xxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
If to an Investor, as set forth on Schedule I.
13. Counterparts. This Agreement may be executed in any number of original or
facsimile counterparts, each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
14. Amendments and Waivers. This Agreement may not be amended, supplemented or
otherwise modified except in a written instrument executed by each of the Parties. No waiver by
any of the Parties hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence. No waiver by any of the Parties of any of
the provisions hereof shall be effective unless explicitly set forth in writing and executed by the
Party sought to be charged with such waiver.
15. Headings; Construction. The section headings contained in this Agreement are for
reference purposes only and shall not be deemed a part of this Agreement or affect in any way the
meaning or interpretation of this Agreement. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and
no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
16. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other terms and provisions
of this Agreement shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as possible in an
acceptable manner in order that the Merger and the transactions contemplated hereby are consummated
as originally contemplated to the greatest extent possible.
17. Entire Agreement. This Agreement, together with the schedules, exhibits, and
other agreements expressly referenced herein and the several confidentiality agreements between
LKCM and each of the Parties, constitutes the entire agreement of the Parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and undertakings, both written and
oral, among the Parties with respect to the subject matter hereof and thereof.
18. No Third Party Beneficiaries. This Agreement shall be binding upon and inure
solely to the benefit of the Parties hereto and their permitted successors and assigns and nothing
herein, express or implied, is intended to or shall confer upon the any other person (including,
without limitation, the Company and its stockholders) any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
[Remainder of Page Intentionally Blank]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.
| LKCM Private Discipline Master Fund, SPC | ||||||
| By: | /s/ J. Xxxxx Xxxx | |||||
| Name: | J. Xxxxx Xxxx | |||||
| Title: | Vice President of LKCM Alternative Management, LLC | |||||
| CPFW Holdings, L.P. | ||||||
| By: | /s/ Xxxxx X. Xxxx | |||||
| Name: | Xxxxx X. Xxxx | |||||
| Title: | Vice President of CPFW Holdings Genpar, LLC | |||||
