EXECUTION COPY
RESTRUCTURING AGREEMENT
dated as of April 30, 2002
by and among
HY I INVESTMENTS, L.L.C.,
THOSE INVESTMENT FUNDS THAT ARE MANAGED BY XXXXXXX MANAGEMENT CORPORATION
AND ITS AFFILIATED ENTITIES AND THAT ARE HOLDERS OF OLD NOTES
and
PENTACON, INC.
TABLE OF CONTENTS
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This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
Page
No.
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ARTICLE I THE OFFER
1.01 The Offer.............................................................1
1.02 Holder Actions........................................................3
1.03 Company Board Representation; Section 14(f)...........................4
1.04 Conditions to Holders' Obligations....................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.01 Organization and Qualification........................................6
2.02 Capital Stock.........................................................6
2.03 Authority Relative to This Agreement..................................7
2.04 Non-Contravention; Approvals and Consents.............................7
2.05 Legal Proceedings.....................................................8
2.06 Information Supplied; Company Reports.................................8
2.07 Section 203 of the DGCL Not Applicable................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE HOLDERS
3.01 Organization and Qualification........................................9
3.02 Authority Relative to This Agreement..................................9
3.03 Non-Contravention; Approvals and Consents............................10
3.04 Legal Proceedings....................................................10
3.05 Information Supplied.................................................10
ARTICLE IV COVENANTS OF THE COMPANY
4.01 Conduct of Business..................................................11
4.02 Issuance of Securities...............................................11
ARTICLE V ADDITIONAL AGREEMENTS
5.01 Charter Amendment....................................................11
5.02 Company Stock Plan...................................................11
5.03 Expenses.............................................................11
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER
6.01 Termination..........................................................12
6.02 Effect of Termination................................................13
6.03 Amendment............................................................13
6.04 Waiver...............................................................13
ARTICLE VII GENERAL PROVISIONS
7.01 Non-Survival of Representations, Warranties, Covenants and
Agreements.........................................................13
7.02 Notices..............................................................13
7.03 Entire Agreement; Incorporation of Exhibits..........................15
7.04 Public Announcements.................................................15
7.05 No Third Party Beneficiaries.........................................15
7.06 No Assignment; Binding Effect........................................15
7.07 Headings.............................................................15
7.08 Invalid Provisions...................................................15
7.09 Governing Law........................................................16
7.10 Enforcement of Agreement.............................................16
7.11 Counterparts.........................................................16
Schedule A
ii
This
RESTRUCTURING AGREEMENT dated as of April 30, 2002 (this
"AGREEMENT") is made and entered into by and among HY I INVESTMENTS, L.L.C.,
THOSE INVESTMENT FUNDS MANAGED BY XXXXXXX MANAGEMENT CORPORATION AND ITS
AFFILIATED ENTITIES AND THAT HOLD OLD NOTES (as defined below) (together, the
"HOLDERS") and PENTACON, INC., a
Delaware corporation (the "COMPANY").
WHEREAS, the Holders and the Company have each determined that it is
advisable and in their respective best interests to consummate the transaction
provided for herein in which the Company would make an offer to acquire all of
the issued and outstanding 12.25% Senior Subordinated Notes due 2009 of the
Company ("OLD NOTES") in exchange for new notes and preferred stock upon the
terms and subject to the conditions of this Agreement; and
WHEREAS, the Holders and the Company desire to make certain
representations, warranties and agreements in connection with the transactions
contemplated by this Agreement and also to prescribe various conditions to the
consummation of such transactions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE OFFER
1.01 THE OFFER. (a) Subject to the other terms hereof and provided that
this Agreement shall not have been terminated in accordance with SECTION 6.01,
the Company, as promptly as is practicable after the date hereof but in any
event not later than 30 days after the date hereof, shall commence (within the
meaning of applicable rules under the Securities Exchange Act of 1934, as
amended (such Act and the rules and regulations promulgated thereunder being
referred to herein as the "EXCHANGE ACT")) and will pursue an exchange offer
(the "OFFER") to acquire all of the issued and outstanding Old Notes on the
basis that the exchanging holders of Old Notes shall share ratably, according
to the principal amount of Old Notes exchanged by each such holder in relation
to the aggregate principal amount of Old Notes exchanged by all holders of Old
Notes tendering their Old Notes pursuant to the Offer, of (i) $35,000,000
principal amount of the Company's Senior Subordinated PIK Notes due 2007 (the
"NEW NOTES") to be issued under an indenture to be in form and substance
satisfactory to the Company and the Holders, and (ii) shares of the Company's
capital stock (either common or convertible preferred stock having the
designations and preferences agreed to among the Company and the Holders) (the
"NEW STOCK")), in either case, entitling the noteholders participating in the
Offer to 90% of the voting control and rights to distributions in respect of
the Company. In connection with the Offer, the Company agrees to solicit
consents (the "CONSENT SOLICITATION") to an amendment of the Indenture dated as
of March 30, 1999 (the "OLD INDENTURE") by and among the Company, the
guarantors named therein and State Street Bank and Trust Company, as trustee,
to be in form and substance satisfactory to the Company and the Holders,
waiving current defaults under, and substantially modifying the covenants and
restrictions under, the Old Indenture (such amendment being the "INDENTURE
AMENDMENT"). The Company shall not waive any condition to, or make any changes
in the terms and conditions of, the Offer or the Plan (as defined below)
without the unanimous consent of the Holders; PROVIDED, HOWEVER, the Offer may
be extended by the Company to any date on or before June 30, 2002 (the "FINAL
EXPIRATION DATE") if (x) immediately prior to the expiration of the Offer any
condition to the Offer shall not be satisfied and (y) the Board of Directors of
the Company (the "BOARD OF DIRECTORS") determines there is a reasonable basis
to believe that such condition could be satisfied within such period; PROVIDED
FURTHER that the Company shall extend the Offer at the request of the Holders
from time to time to a date not later than the Final Expiration Date. Assuming
the prior satisfaction or waiver of the conditions of the Offer and subject to
the foregoing right to extend the Offer, the Company shall issue the New Notes
and the New Stock in exchange for Old Notes tendered pursuant to the Offer as
soon as practicable after the Company accepts Old Notes for exchange under the
Offer (the "CONSUMMATION DATE"). The Offer shall be conducted in such a manner
that the issuance of the New Notes and New Stock shall be exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"SECURITIES ACT").
(b) As soon as practicable on the date of commencement of the Offer, the
Company shall take such steps as are reasonably necessary to cause a
Confidential Offering Memorandum and Consent Solicitation and a related Letter
of Transmittal, each in a form customary for a transaction of the type
contemplated hereunder, to be disseminated to the holders of Old Notes as and
to the extent required by applicable federal securities laws (the Confidential
Offering Memorandum and Consent Solicitation, Letter of Transmittal and any
related summary advertisement, together with all amendments and supplements
thereto, the "OFFER DOCUMENTS"), which Offer Documents shall incorporate the
material terms of this Agreement and other customary terms. The Holders and the
Company shall correct promptly any information provided by any of them for use
in the Offer Documents which shall have become false or misleading, and the
Company shall take all steps necessary to cause the Offer Documents as so
corrected to be disseminated to holders of Old Notes, in each case as and to
the extent required by applicable federal securities laws. The Holders and
their counsel shall be given an opportunity to review and comment on the Offer
Documents prior to the dissemination of such Offer Documents. The Company and
the Holders shall cooperate with each other in the preparation of the Offer
Documents.
(c) Subject to the terms hereof, the Company shall use commercially
reasonable efforts to complete the Offer and the Consent Solicitation in
accordance with the terms hereof. Upon satisfaction of all conditions to the
Offer, the Company shall complete the Offer and accept the Old Notes for
exchange of New Notes and New Stock in accordance with the terms of the Offer
and shall execute the Indenture Amendment, in each case as soon as reasonably
practicable following the expiration of the Offer.
(d) Notwithstanding the foregoing, at any time prior to the Consummation
Date (including after commencement of the Offer), the Company may elect to
implement the Offer by means of a pre-negotiated Chapter 11 plan of
reorganization filed under 11 U.S.C. Sections 101 et. seq. (the "BANKRUPTCY
CODE") on terms materially identical to the Offer or as otherwise agreed to by
the Holders and the Company (the "PLAN"). The Company and the Holders shall
cooperate with
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each other in the preparation of any such Plan and the Holders and their
counsel shall have the opportunity to review and comment on the Plan prior to
its filing. The Holders shall approve such Plan prior to its filing by the
Company. Without limiting the foregoing, the Plan will not be deemed to have
terms materially identical to the Offer unless:
(i) indebtedness owed to the Company's senior bank lenders will
either be (x) repaid in full in cash on the effective date of the Plan
(the "EFFECTIVE DATE") or on such other terms as are acceptable to the
senior bank lenders or (y) restructured on terms acceptable to the senior
bank lenders, the Company and the Holders;
(ii) accounts payable which are due and owing to the trade creditors
of the Company will be either (x) paid in full on the Effective Date or
(y) restructured or compromised on terms acceptable to such creditors, the
Company and the Holders;
(iii) the holders of Old Notes will receive their pro rata
proportion of (x) New Stock of the Company, which stock shall be the only
class of stock outstanding and shall entitle the holders to 90% of the
voting rights and rights to distributions and (y) $35,000,000 original
principal amount of New Notes to fully discharge the claims represented by
the Old Notes (such New Stock and New Notes to contain such terms and
entitlements as are acceptable to the Holders);
(iv) the amount of New Stock distributed to holders of common stock
on the date of the confirmation of the Plan (the "CONFIRMATION DATE")
represents 10% of the sum of the New Stock to be issued to the holders of
Old Notes and such shareholders on the Effective Date;
(v) the management incentives are issued and reserved as
contemplated by Section 5.02 hereof.
1.02 HOLDER ACTIONS. (a) Subject to the terms and conditions of this
Agreement, each Holder hereby severally approves and consents to the Offer or,
conversely, such Plan, and severally agrees to tender or cause to be tendered
all Old Notes beneficially owned by it pursuant to the Offer and to vote or
cause to be voted all such Old Notes in favor of the Indenture Amendment;
PROVIDED, that if at any time the Company receives a bona fide offer for the
purchase of the stock and/or Old Notes or all or substantially all of the assets
of the Company or for the merger or consolidation of the Company with or into
any other company (collectively, an "ALTERNATIVE OFFER"), which the Board of
Directors and the Holders, in good faith after consultation with each other,
determine to be superior to the Offer or Plan (a "SUPERIOR OFFER"), then the
Holders shall have the right, prior to the Consummation Date of the Offer or the
Effective Date of any such Plan, to rescind their approval and consent to the
Offer or Plan, as applicable, and to vote for or consent to such Superior Offer.
Each of the Company and the Holders agree to inform the other upon its receipt
of any proposal, expression of interest or request for information from any
person relating to an Alternative Offer and to deliver to the other any and all
written materials received by such person in connection therewith. In addition,
nothing contained herein shall be deemed to restrict the sale or transfer by any
Holder of any of
3
its Old Notes; provided, that the purchaser thereof shall be bound by the terms
of this Agreement, including this Section 1.02.
(b) So long as this Agreement has not been terminated: (a) the Holders
will (i) not file a notice of default, acceleration or sale or take any other
action to collect on the Old Notes, including, without limitation, instructing
the Trustee on how to proceed in the exercise of any and all remedies, or (ii)
give instructions to the Trustee, if and when reasonably appropriate in their
determination and in such form as they in their discretion deem appropriate, to
desist from taking action that is inconsistent with this Agreement or the
Offer; so long as (x) no indemnity by such Holders is required in connection
with such action or notice and (y) the Holders, in their reasonable judgment,
determine that they would not be subject to any liability in connection with
their taking of any such action or giving of such notice; and (b) each of the
Holders will not, directly or indirectly, sell, assign, transfer, hypothecate
or otherwise dispose of (i) any Old Notes beneficially owned by it or as to
which it has investment authority or discretion (including Old Notes acquired
after the date hereof), (ii) any claim (as that term is defined in section
101(5) of the Bankruptcy Code) arising from, based on or related to the Old
Notes, or (iii) any option, interest in, or right to acquire any Old Notes or
claim referred to in clauses (i) and (ii) above, unless the transferee thereof
agrees in writing for the benefit of the other parties hereto to be bound by
all of the terms of this Agreement and executes a counterpart signature page of
this Agreement and the transferor provides the Company and the Holders with a
copy thereof, in which event each party shall be deemed to have acknowledged
that its obligations to the Holders hereunder shall be deemed to constitute
obligations in favor of such transferee.
1.03 COMPANY BOARD REPRESENTATION; SECTION 14(F). (a) The Company and the
Holders shall use their commercially reasonable efforts to (i) cause each of
the directors (except the Company's chief executive officer) to resign from the
Board of Directors, effective as of the Consummation Date or Effective Date, as
applicable, and (ii) take all actions necessary to cause the Board of Directors
to consist of seven persons, one of whom shall be the Company's chief executive
officer, one of whom shall be selected by the existing Board of Directors and
five of whom shall be selected by the Holders, and in connection therewith
shall accept the resignations of those incumbent directors designated by the
Company and cause the Holders' designees to be elected.
(b) The Company's obligations to appoint the Holders' designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, if applicable. The Company shall promptly
take all actions required pursuant to such Section and Rule in order to fulfill
its obligations under this Section. In addition the Company shall include in
the Offer Documents or the Plan (and any related disclosure statement), such
information with respect to the Company and its officers and directors as is
required under applicable law. The Holders shall supply to the Company and be
solely responsible for any information with respect to either of them and their
designees, officers, directors and affiliates provided for inclusion in any
such materials.
1.04 CONDITIONS TO HOLDERS' OBLIGATIONS. The obligation of each Holder to
tender the Old Notes owned beneficially and of record by it in the Offer or
pursuant to the Plan, or to vote in favor of the Indenture Amendment, the Offer
or the Plan is subject to the fulfillment of
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each of the following conditions (all or any of which may be waived in whole or
in part by such Holder in its sole discretion):
(a) Preparation, execution, delivery and, to the extent required, filing
and approval of documentation contemplated hereby, by the Offer or by the Plan,
or which is otherwise required by the Holder, in each case, in form and
substance satisfactory to the Holder;
(b) The representations and warranties made by the Company in this
Agreement, any Offering Documents and/or the Plan shall be true and correct in
all material respects on and as of the Consummation Date (in the case of the
Offer) or on the Confirmation Date and the Effective Date (in the case of a
Plan), as applicable, as though such representation or warranty was made on and
as of such date;
(c) The Board of Directors as of the time of the Consummation Date and/or
the Effective Date shall consist of seven persons with the composition
specified in SECTION 1.03(a) (and, in the case of a Plan, all steps required to
effect such condition, including the resignations of applicable directors and
appointment of successor directors, shall have been completed (and are
irrevocable) to the satisfaction of the Holder on or prior to the Confirmation
Date);
(d) On or prior to the Consummation Date or the Confirmation Date, the
Company shall have (i) entered into employment agreements with such of its
officers as may be designated by the Holders and who shall not currently be
parties to employment agreements with the Company, (ii) obtained written
instruments from such of its officers as may be designated by the Holders
waiving or modifying any change in control termination or other severance
rights that may be triggered upon the entering into or consummation of the
Offer or the Plan under any employment contract, severance plan or similar
agreement or policy maintained by the Company, in each case in form and
substance satisfactory to the Holders, and (iii) entered into agreement with
such officers or employees as shall be designated by the Holders regarding the
substitution or termination of stock options, stock awards, equity appreciation
rights, the rights to receive any of the foregoing or any other similar rights,
in each case, in form and substance satisfactory to such Holder.
(e) With respect to the Offer, Old Notes shall have been tendered in the
Offer which, together with the Old Notes held by the Holders, constitute not
less than 95% in aggregate principal amount of the Old Notes currently
outstanding shall have been tendered in the Offer.
(f) The Holders shall have completed their due diligence investigations
of the Company with results satisfactory to the Holders in their sole
discretion.
(g) On or prior to the Consummation Date or the Confirmation Date, the
Company shall have executed definitive agreements with its current senior
secured lenders or other lenders reasonably satisfactory to the Holders, in
either case, providing for a $65,000,000 revolving credit facility in such form
and having such terms and conditions as may be reasonably satisfactory to the
Holders.
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(h) On or prior to the Consummation Date or the Confirmation Date,
the Company shall have adopted the Company Stock Plan (as defined in SECTION
5.02).
(i) On or prior to the Consummation Date or the Confirmation Date
(and without limiting the provision of clause (a) above), the Company and the
guarantors named therein shall have executed a registration rights agreement in
the form and substance satisfactory to the Holder but in any event, providing
for the registration of the securities to be delivered pursuant to the Offer or
the Plan (the "REGISTRATION RIGHTS AGREEMENT").
(j) On or prior to the Consummation Date or the Confirmation Date,
the Company shall have obtained the agreement of the holders of the Restricted
Voting Common Stock (as defined in SECTION 2.02) (i) to permanently waive their
right to elect one member of the Board of Directors and (ii) to vote in favor of
an amendment of the Company's Certificate of Incorporation to eliminate the
Restricted Voting Common Stock and provide for the conversion of the outstanding
Restricted Voting Common Stock into Company Common Stock (as defined in SECTION
2.02) on a share-for-share basis, subject to adjustment for any reverse stock
split of the Company Common Stock.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holders that as of the date
hereof and (x) as of the Consummation Date (in the case of the Offer) and (y)
as of the Effective Date (in the case of a Plan):
2.01 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. The Company has previously delivered to the
Holders correct and complete copies of its Certificate of Incorporation and
Bylaws, each of which remains in full force and effect and have not been
modified or amended except as contemplated hereunder.
2.02 CAPITAL STOCK. The authorized capital stock of the Company
consists solely of 50,000,000 shares of common stock, par value $0.01 per share
("COMPANY COMMON STOCK"), 1,000,000 shares of restricted voting common stock,
par value $.01 per share ("RESTRICTED VOTING COMMON STOCK"), and 10,000,000
shares of preferred stock, par value $0.01 per share ("COMPANY PREFERRED
STOCK"). As of April 1, 2002, 16,960,139 shares of Company Common Stock, 242,047
shares of Restricted Voting Common Stock and no shares of Company Preferred
Stock were issued and outstanding, and 2,550,000 shares of Company Common Stock
were reserved for issuance pursuant to the Pentacon, Inc. 1998 Stock Plan (the
"1998 STOCK PLAN"). No shares of Company Common Stock, Restricted Voting Common
Stock or Company Preferred Stock are held in the treasury of the Company. Since
April 1, 2002, there has been no change in the number of issued and outstanding
shares of Company Common Stock,
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Restricted Voting Common Stock or Company Preferred Stock, except for shares
of Company Common Stock issued upon the exercise of options granted under the
1998 Stock Plan. All of the issued and outstanding shares of Company Common
Stock and Restricted Voting Common Stock are, and all shares reserved for
issuance (including the shares of New Stock issuable in the Offer and the
shares of Company Common Stock issuable on conversion thereof) will be, upon
issuance in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized, validly
issued, fully paid and nonassessable. Except for shares reserved for issuance
upon the exercise of currently outstanding options granted under the 1998
Stock Plan, there are no outstanding subscriptions, options, warrants, rights
(including "phantom" stock rights), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or agreement
(together, "STOCK-RELATED AGREEMENTS"), obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of the Company or
any subsidiary or to grant, extend or enter into any Stock-Related Agreement
with respect thereto or otherwise provide any payment or compensation based
on "phantom" stock or measured by the value of the Company's or any
subsidiary's stock, assets, revenues or other similar measure.
2.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors, and except as
provided in SECTION 5.01 hereof, no other corporate proceedings on the part
of the Company or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
2.04 NON-CONTRAVENTION; APPROVALS AND CONSENTS. (a) The execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a material violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any lien, claim, mortgage, charge,
encumbrance, security interest, pledge or equity of any kind ("LIEN") upon
any of the assets or properties of the Company or any of its subsidiaries
under, any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or Bylaws of the Company or (ii) subject to the taking of the
actions described in paragraph (b) of this Section, (x) any statute, law,
rule, regulation or ordinance (together, "LAWS"), or any judgment, decree,
order, writ, permit or license (together, "ORDERS"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality
of the United States, any foreign country or any domestic or foreign state,
county, city or other political
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subdivision (a "GOVERNMENTAL OR REGULATORY AUTHORITY") applicable to the
Company or any of its subsidiaries or any of their respective assets or
properties, or (y) any note, bond, mortgage, security agreement, indenture,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind (together, "CONTRACTS") to which the
Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or any of their respective assets or properties is bound.
(b) Except for (i) the filing of the certificate of designations
relating to the New Stock with the
Delaware Secretary of State, to the extent
required, (ii) filings in connection with the Registration Rights Agreement with
the Securities and Exchange Commission ("SEC") and as may be required under
state securities laws, and (iii) the approval of the Plan by the applicable
court, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority or other public or private third party is
necessary, or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any Contract to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or any of their respective assets or properties is
bound, for the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder or the consummation of
the transactions contemplated hereby, the failure of which consent or approval
to be obtained, or action, filing or notice to be made, would be material.
2.05 LEGAL PROCEEDINGS. Except as disclosed in the reports filed
with the Company SEC Documents (as defined in SECTION 2.06(b)) prior to the date
of this Agreement, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of the Company, threatened against, relating to or
affecting, nor to the knowledge of the Company are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting the Company or any of its subsidiaries or any of their
respective assets and properties which would be material and (ii) neither the
Company nor any of its subsidiaries is subject to any order of any Governmental
or Regulatory Authority with respect to the transactions contemplated by this
Agreement which would be material.
2.06 INFORMATION SUPPLIED; COMPANY REPORTS. (a) Neither the Offer
Documents nor the Plan (and the related disclosure documents) will, at the date
they are first distributed or at the Consummation Date or Effective Date, as
applicable, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect to
information supplied in writing by or on behalf of any Holder expressly for
inclusion therein.
(b) Since December 31, 1999, the Company has filed all reports,
forms, statements and other documents (collectively, together with all financial
statements included or incorporated by reference therein, the "COMPANY SEC
DOCUMENTS") required to be filed by the Company with the SEC pursuant to the
provisions of the Securities Act or Section 12(b), 12(g) or 15(d) of the
Exchange Act. Each of the Company SEC Documents, as of its filing date, complied
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act. None of the Company SEC Documents, as of their respective
filing dates,
8
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) Each of the consolidated financial statements (including related
notes) included in the Company SEC Documents presented fairly in all material
respects the consolidated financial condition, cash flows and results of
operations of the Company and its subsidiaries for the respective periods or as
of the respective dates set forth therein. Each of the financial statements
(including related notes) included in the Company SEC Documents has been
prepared in accordance with United States generally accepted accounting
principles ("GAAP"), consistently applied during the periods involved, except
(i) as noted therein, (ii) to the extent required by changes in GAAP or (iii) in
the case of unaudited financial statements, normal recurring year-end audit
adjustments and as permitted by Form 10-Q of the SEC.
2.07 SECTION 203 OF THE DGCL NOT APPLICABLE. Section 203 of the
General Corporation Law of the State of
Delaware does not, before the
termination of this Agreement, apply to this Agreement, the Offer, the Plan
or the other transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE HOLDERS
Each Holder severally represents and warrants to the Company with
respect to such Holder as of the date hereof and as of the Consummation Date
(in the case of the Offer) or the Effective Date (in the case of a Plan) (for
purposes hereof, Xxxxxxx Management Corporation hereby makes the following
representations and warranties for and on behalf of itself and each of those
investment funds managed by it or its affiliates which are Holders hereunder):
3.01 ORGANIZATION AND QUALIFICATION. It is an entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has full power and authority to conduct its business as and to
the extent now conducted and to own, use and lease its assets and properties.
3.02 AUTHORITY RELATIVE TO THIS AGREEMENT. It has full power and
authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by it and the consummation of the
transactions contemplated hereby have been duly and validly approved by it,
and no other proceedings on its part or the part of its stockholders,
partners, members or other similar constituents, as the case may be, are
necessary to authorize the execution, delivery and performance of this
Agreement by it and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by it
and constitutes its legal, valid and binding obligation enforceable against it
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights
9
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.03 NON-CONTRAVENTION; APPROVALS AND CONSENTS. (a) The execution
and delivery of this Agreement by it does not, and the performance by it of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result in or
give to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of its assets or properties under, any of the
terms, conditions or provisions of (i) its certificate or articles of
incorporation or bylaws (or other comparable charter documents), or (ii) subject
to the taking of the actions described in paragraph (b) of this Section, (x) any
Laws or Orders of any Governmental or Regulatory Authority applicable to it or
any of its assets or properties, or (y) any Contracts to which it is a party or
by which it or any of its assets or properties is bound.
(b) No consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority or other public or private third party is
necessary or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any Contract to
which it is a party or by which it or any of its assets or properties is bound
for its execution and delivery of this Agreement, the performance of its
obligations hereunder or the consummation of the transactions contemplated
hereby, other than such consents, approvals, actions, filings and notices which
the failure to make or obtain, as the case may be, individually or in the
aggregate, could not be reasonably expected to have a material adverse effect on
its ability to consummate the transactions contemplated by this Agreement.
3.04 LEGAL PROCEEDINGS. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Holder, threatened against,
relating to or affecting, nor to its knowledge are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting, it or any of its assets and properties which,
individually or in the aggregate, could be reasonably expected to have a
material adverse effect on its ability to consummate the transactions
contemplated by this Agreement, and such Holder is not subject to any order of
any Governmental or Regulatory Authority which, individually or in the
aggregate, could be reasonably expected to have a material adverse effect on its
ability to consummate the transactions contemplated by this Agreement.
3.05 INFORMATION SUPPLIED. The information supplied or to be supplied
in writing by or on behalf of the Holder expressly for inclusion in the Offer
Documents or the Plan (and the related disclosure documents) will not, at the
date such documents are first published, sent or given to holders of the Old
Notes and at the Consummation Date or Effective Date, as applicable, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
10
ARTICLE IV
COVENANTS OF THE COMPANY
4.01 CONDUCT OF BUSINESS. Except as contemplated by this Agreement,
between the date hereof and the Consummation Date or the Confirmation, as
applicable, the Company and its subsidiaries shall conduct business only in the
ordinary course.
4.02 ISSUANCE OF SECURITIES. Except as contemplated by this
Agreement, between the date hereof and the Consummation Date or the Confirmation
Date, as applicable, the Company shall not issue or agree to issue any
securities of the Company or enter into any Stock-Related Agreements other than
shares of Common Stock issued pursuant to Company stock options outstanding as
of the date hereof.
ARTICLE V
ADDITIONAL AGREEMENTS
5.01 CHARTER AMENDMENT. The Company shall, through the Board of
Directors, as soon as reasonably practicable after the Consummation Date, duly
call, give notice of, convene and hold a meeting of its stockholders for the
purpose of voting on an amendment to its Certificate of Incorporation to
increase the number of authorized shares of Company Common Stock to 250 million
and to eliminate the Restricted Voting Common Stock and provide for the
conversion of the outstanding Restricted Voting Common Stock into Company Common
Stock on a share-for-share basis, subject to adjustment for any reverse split of
the Company Common Stock. As an alternative to increasing the number of shares
of authorized Company Common Stock at the stockholder meeting contemplated by
this SECTION 5.01, the Company may at such meeting seek stockholder approval of
a one for [30] reverse stock split, it being the intention of the parties that
there be sufficient authorized shares of common stock to permit the holders of
the New Stock shall have the ability to convert their shares of New Stock into
Company Common Stock following the stockholder meeting.
5.02 COMPANY STOCK PLAN. Effective as of the Consummation Date or
Confirmation Date, as applicable, the Company shall adopt a long-term incentive
plan having such terms and conditions as may be mutually acceptable to the
Company and the Holders and covering a total of 12.5% of the shares of New Stock
outstanding immediately following the consummation of the Offer or Plan (the
"COMPANY STOCK PLAN"). Grants of awards under the Company Stock Plan shall be
made as contemplated by Schedule A attached hereto.
5.03 EXPENSES. Except for the reasonable out-of-pocket expenses
incurred by the Holders in connection with the negotiation, execution and
implementation of this Agreement, including the reasonable fees, expenses and
disbursements of one counsel for the Holders, which the Company agrees to
reimburse to the Holders, whether or not the Offer or Plan is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense.
11
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.01 TERMINATION. In addition to the other terms and provisions of
this Agreement, this Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) By mutual written agreement of the parties hereto;
(b) By either the Company or the Holders upon notification to the
non-terminating party by the terminating party:
(i) at any time after the Final Expiration Date if the
Consummation Date shall not have occurred;
(ii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise restricting, preventing or prohibiting the Offer or
rejecting the Plan and such order shall have become final and
non-appealable;
(iii) upon the election by the Board of Directors and the
Holders to pursue or accept an Alternative Offer; or
(iv) in the event the terminating party elects to support an
Alternative Offer which they believe is a Superior Offer which is not supported
by the non-terminating party.
(c) By the Holders upon notification to the Company prior to the
Consummation Date or the Effective Date:
(i) if there has been a breach of the representations,
warranties, covenants or agreements on the part of the Company set forth
in this Agreement;
(ii) if any condition set forth in Section 1.04 of this
Agreement is not satisfied as of the date required thereunder, or the Holders
reasonably determine that it is not possible for the such condition to be
satisfied on or prior to such date; or
(iii) if, at any time prior to the Consummation Date or
Effective Date, the Company's senior bank creditors (x) cease to agree to
forbear from, or require the payment of any fee in excess of their customary and
usual fee for such a forbearance or the modification of any material term of the
facility in any way adverse to the Company, in either case, as a condition to
their agreeing to continue to forbear from, (1) accelerating the indebtedness
owing to them by the Company and/or (2) exercising any of their remedies in
respect thereof or (y) take any of the actions described in clauses (1) or (2)
immediately above.
12
(d) By the Company upon notification to the Holders prior to the
Consummation Date or the Effective Date, if there has been a breach of the
representations, warranties, covenants or agreements of a Holder set forth in
this Agreement.
6.02 EFFECT OF TERMINATION. If this Agreement is validly terminated
by either the Company or the Holders pursuant to SECTION 6.01, this Agreement
will forthwith become null and void and there will be no liability or obligation
on the part of either the Company or the Holders (or any of their respective
Representatives or affiliates), except that the provisions of SECTION 5.03 and
this SECTION 6.02 will continue to apply following any such termination.
6.03 AMENDMENT. This Agreement may be amended, supplemented or
modified by action taken by or on behalf of the Company and the Holders. No such
amendment, supplement or modification shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party sought to be
bound.
6.04 WAIVER. The parties may to the extent permitted by applicable
law, (i) extend the time for the performance of any of the obligations or other
acts of the other hereto, (ii) waive any inaccuracies in the representations and
warranties of the other contained herein or in any document delivered pursuant
hereto or (iii) waive compliance with any of the covenants, agreements or
conditions of the other contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
ARTICLE VII
GENERAL PROVISIONS
7.01 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The representations, warranties, covenants and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall not survive the consummation of the Offer or the Plan, except for the
agreements contained in SECTIONS 5.01 and 5.03 and this ARTICLE VII, which shall
survive the Consummation Date or Effective Date, as the case may be.
7.02 NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to the Holders, to:
HY I INVESTMENTS, L.L.C.
c/o Equity Group Investments, L.L.C.
00
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Xxxx Xxxxxx
Holder
c/o Bennett Management Corporation
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Xxx Xxxxxxx
with copies to:
Jenner & Block, LLC
Xxx XXX Xxxxx
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxx
If to the Company, to:
Pentacon, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxx XxXxxxxx, Esq.
with a copy to:
Xxxxxx and Xxxxx, LLP
0000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time
14
may change its address, facsimile number or other information for the purpose
of notices to that party by giving notice specifying such change to the other
parties hereto.
7.03 ENTIRE AGREEMENT; INCORPORATION OF EXHIBITS. (a) Except with
respect to the Confidentiality Agreement between Equity Group Investments,
L.L.C. and the Company, dated as of February 12, 2002, and the Confidentiality
Agreement between Xxxxxxx Management Corporation and the Company, dated as of
February 13, 2002, which the parties thereto expressly hereby acknowledge are
not amended or modified hereby and remain in full force and effect in accordance
with their respective terms, this Agreement supersedes all prior discussions and
agreements among the parties hereto with respect to the subject matter hereof
and contains the sole and entire agreement among the parties hereto with respect
to the subject matter hereof.
(b) Any Exhibit attached to this Agreement and referred to herein is
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
7.04 PUBLIC ANNOUNCEMENTS. Except as otherwise required by law or
the rules of any applicable securities exchange or national market system, so
long as this Agreement is in effect, the parties will not, and will not permit
any of their respective representatives to, issue or cause the publication of
any press release or make any other public announcement with respect to the
transactions contemplated by this Agreement without the consent of the other
parties, which consent shall not be unreasonably withheld. The parties will
cooperate with each other in the development and distribution of all press
releases and other public announcements with respect to this Agreement and the
transactions contemplated hereby, and will furnish the others with drafts of any
such releases and announcements as far in advance as practicable.
7.05 NO THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person.
7.06 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void. Subject to the preceding sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns. This Agreement shall not be binding on
any assignee of a Holder's Old Notes unless such assignee agrees in writing to
be so bound.
7.07 HEADINGS. The headings used in this Agreement have been
inserted for convenience of reference only and do not define, modify or limit
the provisions hereof.
7.08 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law or
order, and if the rights or obligations of any party hereto under this Agreement
will not be materially and adversely affected thereby, (i) such provision will
be fully severable, (ii) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof, and (iii) the
15
remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.
7.09 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
7.10 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity. Notwithstanding anything contained in this
Agreement to the contrary, no party hereto shall have any liability hereunder
for any special, consequential or punitive damages in respect of any matter
which is the subject of this Agreement.
7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be signed by its officer thereunto duly authorized as of the date first above
written.
HY I INVESTMENTS, L.L.C.
By: /c/ Xxx Xxxxxxxxxxx
----------------------------
Name: Xxx Xxxxxxxxxxx
Title: Vice President
THOSE INVESTMENT FUNDS THAT ARE MANAGED BY
XXXXXXX MANAGEMENT CORPORATION AND ITS
AFFILIATED ENTITIES AND THAT ARE HOLDERS OF
OLD NOTES
By: XXXXXXX MANAGEMENT CORPORATION
By: /c/ Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
16
Solely for the purposes of the representations
and warranties set forth in Article III
XXXXXXX MANAGEMENT CORPORATION
By: /c/ Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
PENTACON, INC.
By: /c/ Xxxxxx X. Xxxx
----------------------------
Name: Xxxxxx X. Xxxx
Title: CEO
17
Schedule A
to
Restructuring Agreement
In accordance with Section 5.02 of the
Restructuring Agreement to which this
Schedule is attached and made a part:
If all shares of New Stock issued in the Offer were converted into Common
Stock or the restructuring is effected pursuant to the Plan, the fully diluted
ownership would be as follows (subject to any reverse stock split which may be
effected under a Plan):
AMOUNT PERCENT
----------- -------
Holders of Old Notes.................................. 152,641,251 79.09%
Old Equity of Pentacon................................ 16,960,139 8.79%
Management Incentives:
Issued or issuable upon exercise of options granted
at closing........................................ 13,751,464 7.12%
Reserved for future awards.......................... 9,650,150 5.00%
----------- -------
Total*................................................ 193,003,004 100.00%
=========== =======
* Does not include currently outstanding employee stock options.
The shares of common stock and options in the line entitled "Issued or issuable
upon exercise of options granted at closing" shall be granted at closing to the
persons and in the amount determined by the CEO of the Company, subject to the
approval of the Holders, which shall not be unreasonably withheld. All other
grants shall be in such form and amounts and to such participants as may be
determined by the Board of Directors or the Compensation Committee of the Board
of Directors (as constituted as provided herein, otherwise, as approved by the
Holders) and shall be made only from and after the Consummation Date or
Confirmation, as applicable.
18
