XXXXXXX XXXXX & PARTNERS, L.P.
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 000000
July 13, 1999
PERSONAL AND CONFIDENTIAL
Board of Directors
White Cap Industries, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Re: EXCLUSIVITY AGREEMENT
Ladies and Gentlemen:
The purpose of this letter is to set forth the terms upon which Xxxxxxx
Xxxxx & Partners, L.P. ("LGP") and White Cap Industries, Inc. ("White Cap")
agree to commit the resources necessary to proceed with negotiations towards the
execution of a Merger Agreement for the acquisition of White Cap pursuant to a
recapitalization of White Cap (the "Transaction") no later than 9:30 a.m.
Eastern Daylight Time Friday, July 23, 1999 (the "Exclusivity Period"). The
Exclusivity Period shall be deemed to commence at 6:00 p.m. Eastern Daylight
Time on the date hereof and White Cap represents and warrants that it has not
received an economically superior proposal to that put forward by LGP in
conjunction with this letter agreement from any third party within 72 hours
prior to commencement of the Exclusivity Period. In accordance with the
provisions of this letter agreement, White Cap agrees to negotiate exclusively
and in good faith with LGP for the acquisition of White Cap during the
Exclusivity Period.
By countersignature below, White Cap agrees that neither White Cap nor
any of its officers, affiliates, directors, employees, agents or representatives
will, during the Exclusivity Period, engage in any discussions or negotiations
with, provide any non-public information to, or take any action to encourage the
submission of a proposal by, any third party in respect of a possible
acquisition of White Cap or any substantial portion of its business and assets,
or any transaction which would preclude the accomplishment of the Transaction.
In the event White Cap (a) receives a proposal or offer from a third party
competing with LGP during the Exclusivity Period or is contacted by a third
party with respect to a possible acquisition of White Cap or any substantial
portion of its business and assets during the Exclusivity Period and (b) either
(i) enters into a definitive agreement with respect to such offer or proposal at
any time on or prior to August 23, 1999 or (ii) consummates a transaction with
respect to such offer or
White Cap Industries, Inc.
July 13, 1999
Page 2
proposal at any time on or prior to January 31, 2000, White Cap will
immediately pay to LGP a break-up fee (the "Break-Up Fee"), by wire transfer
to an account designated by LGP, of (1) $12,000,000 immediately upon entering
into such definitive agreement described in clause (b)(i) above, or (2)
$6,000,000 immediately upon consummation of such a transaction described in
clause (b)(ii) above. White Cap further agrees that it will (x) immediately
communicate to LGP the terms of any inquiry, proposal or offer received by
White Cap (and the identity of the inquiring, proposing or offering party, as
the case may be) during the Exclusivity Period with respect to the potential
acquisition of White Cap or any substantial portion of its business or assets
and (y) in the event any such proposal or offer provides for terms
economically superior to terms proposed by LGP on a per share basis, extend
the Exclusivity Period by five (5) calendar days. Notwithstanding anything in
this letter agreement to the contrary, White Cap will not be deemed to have
breached this letter agreement in the event another party seeks or obtains
investment banking or financing services from Xxxxxxxxx, Lufkin & Xxxxxxxx
provided (i) such service are rendered only by such individuals within
Xxxxxxxxx, Lufkin & Xxxxxxxx that are not and have not been representatives
of White Cap with respect to the proposed Transaction or any similar
transaction and (ii) neither such party nor those individuals within
Xxxxxxxxx, Lufkin & Xxxxxxxx providing such services shall receive any
cooperation or assistance from White Cap's directors, officers, employees or
other agents or those individuals within Xxxxxxxxx, Lufkin & Xxxxxxxx that
are or have been representatives of White Cap with respect to the proposed
Transaction or any similar transaction.
You agree to pay all of the reasonable, out-of-pocket expenses
(including, without limitation, reasonable expenses of counsel, accountants,
Xxxx-Xxxxx-Xxxxxx and other filing fees, commitment fees and expenses required
to be paid to financing sources) incurred by LGP in the pursuit of the
Transaction, whether or not an agreement in respect of the Transaction is
reached. In the event we determine during the Exclusivity Period not to proceed
with the Transaction, we will so advise you, and thereafter this letter
agreement shall immediately terminate and you shall not be responsible for any
out-of-pocket expenses incurred by LGP subsequent to such notification.
Both parties hereto agree that without prior written consent of the
other party and except as required by law or the rules of the Nasdaq National
Market, no disclosure shall be made of the fact that we are in discussions
concerning the Transaction until such time as we have entered into a definitive
agreement with respect thereto. Notwithstanding the foregoing, White Cap may
make general reference to entering into this letter agreement for purposes of
terminating any existing discussions or negotiations.
This letter agreement may not be amended or modified except by an
instrument in writing signed by each of the parties hereto. This letter
agreement shall be governed by the laws of the State of California without
regard to principles of conflicts of laws, and each party hereby submits to the
non-exclusive jurisdiction of any state or federal court sitting within the
County of Los Angeles. The parties hereto agree that irreparable damage would
occur in the event any provision of this letter agreement was not performed in
accordance with the terms hereof and that
White Cap Industries, Inc.
July 13, 1999
Page 3
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity. Notwithstanding the foregoing,
the parties hereto agree that in the event of any payment of the Break-Up Fee
by White Cap to LGP, such Break-Up Fee shall represent the sole remedy for
any breach of this letter agreement and shall constitute liquidated damages
agreed upon in light of the difficulty of measuring the damage to LGP, and
the unjust enrichment to White Cap, in the event of any such breach of this
letter agreement.
It should be clearly understood that except as expressly set forth in
this letter agreement, there is no legally binding agreement between us at this
time for the consummation of the Transaction or otherwise, and no such agreement
shall exist until we have entered into a definitive written agreement.
If the foregoing is in accordance with your understanding, please sign
this letter agreement in the space provided below. This letter agreement may be
signed in counterpart, each of which will be considered an original.
Very truly yours,
XXXXXXX XXXXX & PARTNERS, L.P.
By: LGP Management, Inc.
Its General Partner
By:
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Name:
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Title:
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AGREED TO AND ACCEPTED:
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WHITE CAP INDUSTRIES, INC.
By:
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Name:
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Title:
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