SHAREHOLDERS AGREEMENT, dated as of September 1, 1999 (the
"Agreement"), among KEY COMPONENTS, LLC, a Delaware
limited liability company ("KCLLC"), KEY COMPONENTS, INC.,
a New York corporation and the sole existing member of
KCLLC (the "Company"), the shareholders of the Company
listed on the signature pages hereto (the "KCI
Shareholders"), SGC PARTNERS II LLC, a Delaware limited
liability company ("SG"), and KEYHOLD, INC., a Delaware
corporation and a wholly owned subsidiary of SG ("Sub").
-----------------------------------------------------------
Pursuant to a Share Purchase Agreement dated August 12, 1999 (the
"Purchase Agreement"), among KCLLC, the Company, SG and Sub, KCLLC has agreed to
sell newly issued shares of KCLLC to Sub in exchange for payment of the Purchase
Price (as defined in the Purchase Agreement) (the "Shares").
As a condition to the purchase and sale of the Shares under the
Purchase Agreement, KCLLC, the Company and Sub have agreed to enter into the
Amended and Restated Operating Agreement of KCLLC dated the date hereof (the
"Operating Agreement") and KCLLC, the Company, the KCI Shareholders, SG and Sub
have agreed to enter into this Agreement and the Registration Rights Agreement,
dated the date hereof (the "Registration Rights Agreement").
The parties agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings specified below:
"Affiliate" means, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
A Person shall be deemed the "beneficial owner" of, and shall be
deemed to "beneficially own", any securities (a) which such Person or any of its
Affiliates is deemed to "beneficially own" within the meaning of Rule 13d-3
under the Exchange Act or (b) which such Person or any of its Affiliates has the
right to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or understanding or
upon the exercise of any right of conversion or exchange, warrant, option or
otherwise.
"Change of Control" of the Company shall mean such time as:
(i) The MCM Parties shall collectively cease to beneficially own
outstanding shares of capital stock of the Company entitling the MCM Parties to
exercise more than 50% of the total votes entitled to be cast at a regular or
special meeting, or by action by written consent, of shareholders of the
Company;
(ii) A majority of the Board of Directors of the Company shall
consist of Persons other than Continuing Directors. The term "Continuing
Director" shall mean any member of the Board of Directors of the Company on the
date of this Agreement and any member of the Board of Directors elected or
appointed to the Board of Directors in accordance with the terms of this
Agreement;
(iii) The shareholders of the Company shall have approved a
recapitalization, reorganization, merger, consolidation or similar transaction,
in each case, with respect to which all or substantially all the Persons who
were the respective beneficial owners of the outstanding shares of capital stock
of the Company immediately prior to such recapitalization, reorganization,
merger or consolidation, will directly or indirectly beneficially own less than
50% of the combined voting power of the then outstanding shares of capital stock
of the Company resulting from such recapitalization, reorganization, merger,
consolidation or similar transaction;
(iv) any Person or group of Affiliated Persons who are not
shareholders of the Company as of the date of this Agreement directly or
indirectly beneficially own more than 40% of the combined voting power of the
then outstanding shares of capital stock of the Company; or
(v) The shareholders of the Company shall have approved, directly or
indirectly, the sale or other disposition of all or substantially all the
capital stock of the Company or substantially all of the assets of the Company
Group in one transaction or in a series of related transactions.
"Company Group" means the Company and each of the Subsidiaries of
the Company, as of the date hereof and any other Subsidiaries or parent holding
companies created or acquired after the date hereof.
"EBITDA" means, for any period, the sum, without duplication, for
such period, of
(a) Net Income for such period;
PLUS
(b) the amounts deducted, in determining Net Income for such period,
for
(i) provision for taxes based on the income or profits of the
Company and its Subsidiaries,
PLUS
(ii) interest expense (determined in accordance with GAAP),
PLUS
(iii) Management Fees (but not transaction related fees) payable
under the Management Agreement, dated May 28, 1998, between the Company
and MCM (the "Management Agreement")
PLUS
(c) the amount deducted, in determining Net Income for such period,
for amortization and depreciation of assets of the Company and its Subsidiaries
during such period
2
(as determined in accordance with GAAP);
PLUS
(iv) an amount, calculated as provided in clauses (a), (b) and (c)
of this definition, with respect to Valley Forge Corporation and G& H
Technologies, Inc. for the period commencing on the first day of such period and
ending immediately prior to the date such acquisition was consummated;
PLUS
(d) non-recurring transaction expenses deducted in determining Net
Income for such period in connection with (i) the Acquisition of Valley Forge
Corporation, (ii) entering into the in the Amended and Restated Credit and
Guaranty Agreement dated January 19, 1999 (the "Credit Agreement"), and (iii)
the transactions contemplated by this Agreement; and
MINUS
(e) distributions made to the Company to satisfy obligations to the
employees of KCLLC that are due and payable by the Company under the terms of
the stock appreciation rights ("SARs") outstanding on the date hereof.
Capitalized terms used in this definition of EBITDA and not otherwise defined
have the meanings set forth in the Credit Agreement.
"Equity-Linked Financing" means any financing which any Person
receives as consideration for its investment in any member of the Company Group
any security that consists of, is convertible into or exchangeable or
exercisable for, or is based on the value of, any equity security or equity
interest in any member of the Company Group, including, without limitation,
common stock, preferred stock, stock options, stock appreciation rights and
performance units; it being understood that such term does not include a
transaction approved in accordance with Section 5(c) hereof in which any such
equity security or equity interest is issued in consideration for the
acquisition of a trade or business or an interest in a trade or business.
"Equity Securities" means equity securities, partnership interests
or membership interests of any member of the Company Group or of Sub.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Freely Marketable Securities" means securities listed or traded on
a national securities exchange or the Nasdaq National Market System with an
average daily trading volume expressed in dollars (based on the trading volume
for such securities for any thirty consecutive trading days within the two
calendar month period preceding such sale) of at least $1,000,000.
"Governmental Authority" means any court, administrative agency or
commission or other governmental agency or instrumentality, domestic or foreign,
of competent jurisdiction.
3
"IPO Vehicle" means any member of the Company Group or any successor
entity of the foregoing that conducts an initial public offering of equity
securities.
"MCM Shares" means, as of any date, all of the capital stock of the
Company, or other equity securities issued by any member of the Company Group,
then beneficially owned by the MCM Parties.
"MCM Parties" means Xxxx X. Xxxxx, Xxxx X. Xxxxxxxxxx, Xxxx X.
Xxxxxx, Xxxxx X. Xxxx, Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxx, each of the members of
such Person's Shareholder Group, and, with respect to such executives of MCM who
are not Shareholders, related parties and Affiliates.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, Governmental Authority or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Public Float" means the product of (x) the market price (based on
the average closing price for any thirty consecutive trading days as reported on
a national securities exchange or on the Nasdaq National Market System) of the
publicly traded equity securities of the IPO Vehicle and (y) the aggregate
number of shares of such equity securities beneficially owned by Persons other
than SG and its Affiliates and Affiliates of the Company Group (including the
MCM Parties).
"Qualified IPO" means (1) an underwritten initial public offering of
the equity securities of the IPO Vehicle with gross proceeds to the IPO Vehicle
of not less than $50,000,000 or (2) subsequent to an underwritten initial public
offering of such equity securities and any subsequent offerings of such equity
securities, the Public Float with respect to such equity securities is
$75,000,000 or more.
"Regulatory Problem" means any set of facts or circumstances wherein
it has been asserted by any Governmental Authority (or the SBIC Holder believes
that there is a substantial risk of such assertion) that the SBIC Holder is not
entitled to hold, or exercise any significant right with respect to, the SG
Shares.
"SBA" means the United States Small Business Administration, and any
successor agency performing the functions thereof.
"SBIC" means a Small Business Investment Company licensed by an SBA
under the SBIC Act.
"SBIC Act" means the Small Business Investment Act of 1958, as
amended.
"SBIC Holder" means SG.
"SBIC Regulations" means the SBIC Act and the regulations issued by
the SBA thereunder, codified at Title 13 of the Code of Federal Regulations ("13
CFR"), Parts 107 and 121.
4
"SG Shares" means, as of any date, all Shares, or other equity
securities issued by any member of the Company Group, then beneficially owned by
SG.
"Shareholder Group" means with respect to a particular Person (i)
such Person, and to the extent applicable, each of the following: (ii) the
spouse, ancestors, siblings and lineal descendants of such Person, (iii) a trust
for the benefit of any of the foregoing, (iv) any corporation (other than the
Company), limited liability company or partnership controlled by such Person,
members of such Person's immediate family and lineal descendants or trusts for
the benefit of any of the foregoing, (v) the general partners, members and
principals of such Person and their respective Affiliates, (vi) upon the death,
dissolution or liquidation of such Person, such Person's estate, executors,
administrators and personal representatives, and heirs, legatees and
distributees, and (vii) with respect to the MCM Parties, each other MCM Party.
"Subsidiary" of any Person means a corporation, company or other
entity (i) more than 50% of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority)
are, or (ii) which does not have outstanding shares or securities (as may be the
case in a partnership, joint venture or unincorporated association), but more
than 50% of whose ownership interest representing the right to make decisions
for such other entity is, now or hereafter beneficially owned or controlled,
directly or indirectly, by such Person, but such corporation, company or other
entity shall be deemed to be a Subsidiary only so long as such ownership or
control exists.
"Total Equity Interest in the Company" shall mean all equity
interests in the Company (assuming full conversion, exchange (including in
accordance with the Exchange Right set forth in Section 14) or exercise of all
securities convertible into, exchangeable for, or exercisable for common stock
of the Company, par value $.001 per share ("Common Stock")). In determining the
percentage of Total Equity Interest in Company represented by the Equity
Securities beneficially owned by any party hereto, any rights of conversion,
exercise or exchange relating to Common Stock (whether or not presently
exercisable or exchangeable) shall be deemed to be exercised and all Common
Stock subject to such rights shall be deemed to be outstanding.
2. Current Holdings. All outstanding Equity Securities, and all
existing rights and options respecting any Equity Securities (including any
existing SARs and excluding the outstanding capital stock of Sub), are set forth
on Schedule I hereto together with the beneficial owners thereof. It is
understood and agreed among the parties that although the outstanding stock
appreciation rights and options set forth on Schedule I (the "Equity Based
Rights") hereto are obligations of the Company as of the date hereof, it is the
intention of the parties that SG shall share on a pro rata basis any dilution or
expense created by the exercise or retirement of such Equity Based Rights, as if
such Equity Based Rights were obligations of KCLLC as of the date hereof.
Notwithstanding the forgoing, SG shall have the right to approve, which approval
shall not be unreasonably withheld, any structure, agreement, plan or other
documentation proposed to be used to achieve such pro rata sharing; provided,
however, that SG shall not be required to approve any such proposed structure,
agreement, plan or other documentation that would cause SG to incur any cost or
expense, or forgo any gain, other than its pro rata share of dilution or stock
appreciation right payment.
5
3. Voting Matters. (a) Any time at which the shareholders of the
Company or the Members of KCLLC shall have the right to, or shall, vote or shall
have the right to, or shall, act by written consent, with respect to any matter,
including the election of directors, each party hereto agrees to vote all Equity
Securities of any member of the Company Group then beneficially owned by such
party in the manner so as to give effect to the provisions of this Agreement.
(b) If SG gives written notice to the KCI Shareholders that it
desires to remove a Company director designated by it, the parties hereto agree
to vote all Equity Securities then beneficially owned by such parties in favor
of removing such director if a vote of holders of such Equity Securities shall
be required to remove the director.
(c) Each KCI Shareholder represents that such KCI Shareholder has
not granted and is not a party to any proxy, voting trust or other agreement
which is inconsistent with or conflicts with the provisions of this Section 3,
and no KCI Shareholder shall grant any proxy or become party to any voting trust
or other agreement which is inconsistent with or conflicts with the provisions
of this Section 3.
4. Additional Investment. Prior to the expiration of SG's obligation
to make the Additional Investment (as defined in the Share Purchase Agreement),
(a) no member of the Company Group may obtain any Equity-Linked Financing from
any Person other than SG or Sub unless SG (through Sub) has made at least one
installment of the Additional Investment in the amount of $5,000,000, and (b) no
member of the Company Group may obtain any Equity-Linked Financing at a price
less than the equivalent of $93.00 per share of Common Stock from any Person
other than SG or Sub unless SG (through Sub) has made the maximum Additional
Investment of $10,000,000.
5. Board of Directors (a) Board Composition. (i) Subject to clause
(ii) below, the Board of Directors of the Company shall consist of seven
directors. The MCM Parties shall have the right to designate five directors (the
"MCM Directors"), SG shall have the right to designate one director (the "SG
Director") and the remaining director shall be an independent director (the
"Independent Director") not affiliated with the MCM Parties or any party to this
Agreement. The Company shall propose up to three individuals to serve as the
Independent Director, one of which shall be approved by SG; provided, however,
that SG shall not be required to approve any such candidate that is not
reasonably qualified to serve as a director of the Company. Initially the MCM
Directors will be Xxxx X. Xxxxx, Xxxx X. Xxxxxxxxxx, Xxxx X. Xxxxxx, Xxxxxx X.
Xxxxxxx and Xxxxxx X. Xxx and the SG Director will be Xxxxxxxxxxx X. Xxxxxx.
(ii) The SG Director shall be one of the six persons whose names are
set forth on Schedule II hereto (the "Approved SG Nominees"). If none of
the Approved SG Nominees is available to serve as the SG Director, the MCM
Parties shall have the right to approve, in their sole discretion, a
suitable replacement SG Director proposed by SG. If the MCM Parties do not
approve a prospective SG Director proposed by SG within 30 days of the
date on which no Approved SG Nominee is available to serve as the SG
Director (a "SGCP Event"), then the approval rights of SG set forth in
Section 5(c) below
6
(the "Approval Rights") shall be canceled and Section 5(c) of this
Agreement shall be of no further force and effect.
(b) The Act of the Board. A quorum for meetings of the Board of
Directors will consist of four of the seven directors, including the SG
Director; provided that, if (i) the SG Director is given at least ten business
days' proper written notice of such meeting, (ii) the Company uses its best
efforts to enable the SG Director to attend such meeting telephonically, and
(iii) the SG Director fails to attend such meeting, any four of the remaining
six directors shall constitute a quorum. Assuming a quorum is present, the act
of a majority of the directors present shall be the act of the Board of
Directors.
(c) SG Approval Rights. Until the consummation of a Qualified IPO or
the occurrence of an SGCP Event, SG shall have the right to approve any
Significant Action prior to such action being taken.
(i) "Significant Action" means any one or more of the following:
(A) any sale of all or substantially all the assets of the
Company Group (by sale of Equity Securities (including Common Stock)
or assets, merger or otherwise); provided that, after three years,
SG's approval shall not be required so long as (1) (x) the Company
or the KCI Shareholders purchase all of the capital stock of Sub
prior to the consummation of such sale or (y) any purchaser in such
sale is required by the terms of the definitive purchase agreement
to purchase all of the capital stock of Sub and (2) SG is given a
good faith, reasonable opportunity to bid for the purchase of the
Company Group's business;
(B) any purchases or sales of assets comprising or having a
value equal to, in any twelve month period, in excess of 10% of the
Company Group's consolidated tangible assets at the beginning of
such twelve month period, other than purchases and sales of
inventory and equipment made in the ordinary course of business,
consistent with past practice;
(C) any issuance of any Equity Securities (other than
issuances (1) to management of the Company Group at a price equal to
or greater than fair market value as determined by the Board of
Directors in good faith under the Company's benefit plans, (2) in a
Qualified IPO, or (3) in connection with the Additional Investment);
and any decreases in the outstanding capital stock, or other
material matter affecting the capital structure, of any member of
the Company Group; provided, however, that "management of the
Company Group" shall not include the MCM Parties for the purposes of
clause (1) of this Section;
(D) liquidation, recapitalization or dissolution of any member
of the Company Group or the filing of a bankruptcy petition by any
member of the Company Group;
7
(E) any increase in consolidated indebtedness of the Company
Group, in any twelve month period, in excess of 5% of the Company
Group's existing committed consolidated indebtedness at the
beginning of such period (including existing availability under the
existing revolving loan commitment pursuant to Section 2.1.1 of the
Credit Agreement (the "Existing Revolver")), or any amendment to
material terms of any indebtedness of any member of the Company
Group including any amendment effecting an increase in the Company
Group's maximum allowable amount of capital expenditures in effect
on the date hereof. The amount of the Company's existing committed
consolidated indebtedness as of the date of this Agreement is $[ ].
For the purposes of this paragraph, "consolidated indebtedness"
shall not include trade debt incurred in ordinary course of
business;
(F) any amendment to the Certificate of Incorporation or
Bylaws of the Company or the Operating Agreement which would
adversely affect the rights of SG (including amendments relating to
the size of the Board of Directors of the Company);
(G) any changes in the Chief Executive Officer or Chief
Financial Officer of the Company (it being understood and agreed
that, as of the date hereof, the Company intends to hire a full-time
President or Chief Operating Officer and that SG shall not
unreasonably withhold its approval of the selection of such officer)
or any material change in management compensation, or creation of or
material change to any existing management incentive plans, in each
case, for any member of the Company Group (which approval may not be
unreasonably withheld);
(H) any transactions between or among any member of the
Company Group on the one hand and any Affiliate of the Company Group
or the MCM Parties on the other hand, excluding the payment of
management fees and transaction-related fees to MCM consistent with
that which is permitted under the Indenture of KCLLC and Key
Components Finance Corp., dated May 28, 1998 (the "Indenture") and
written agreements entered into prior to the date hereof, or in the
absence of the Indenture, such management fees and
transaction-related fees consistent with those that would have been
permitted thereunder;
(I) the entering into, or amending any material term of, any
transaction outside the ordinary course of business or in excess of
$2,500,000 (which approval may not be unreasonably withheld);
(J) any capital contribution to any Subsidiary of the Company
in excess of $5,000,000 in any year; provided that approval will not
be required if such contribution is being made as part of a
transaction that does not otherwise constitute a Significant Action;
(K) a material change in the nature of the Company Group's
business, taken as a whole;
8
(L) any other matters affecting SG's status as a licensee
under the SBIC Act, or any other matters that could reasonably be
expected to cause any member of the Company Group, as constituted on
the date hereof, to cease to be a pass-through entity for federal
income tax purposes, or any other matter that could reasonably be
expected to result in the Company ceasing to be an entity in which
equity holders do not generally have liability for its obligations;
and
(M) any decisions of the Tax Matters Partner (as defined in
the Operating Agreement) or any matters to be determined in the
discretion of the board of directors of KCLLC, in each case,
relating to allocations or distributions of income, gain, loss or
expense or distributions of cash or property to the members of
KCLLC; provided however, that nothing in this subsection M shall
give SG approval rights over (i) distributions in accordance with
the Operating Agreement to pay taxes of the members and shareholders
of members of KCLLC or (ii) the method of making Section 704(c)
allocations under Section 1.704-3(b) of the Treasury Regulations.
(ii) If SG fails to approve a Significant Action for which approval
has been requested within five business days after such request, the parties
hereto shall (A) submit the matter to the dispute resolution procedure set forth
in Section 6 below (the "Dispute Resolution Procedure") to determine if the
relevant Significant Action should be carried out, or (B) if mutually agreed by
the parties hereto, implement the buyout procedure set forth in Section 8 below
(the "Buyout Procedure"); provided, however that if the Significant Action that
SG fails to approve involves an event described in subsection (i)(A) of this
Section 5(c) or if SG fails to approve more than one Significant Action for
which approval has been requested, SG on the one hand or the Company on the
other hand may invoke the Buyout Procedure. It is understood and agreed by the
parties that from the time the Buyout Procedure is invoked pursuant to this
Section 5(c)(ii) until the ultimate disposition of the Company in accordance
with the Buyout Procedure, the Company may not take any Significant Action,
including any Significant Action or Significant Actions that SG failed to
approve prior to the invocation of the Buyout Procedure without SG's approval
other than any action (whether or not a Significant Action) that is expressly
contemplated by the terms of the Buyout Procedure.
(d) Visitation Rights. In addition to the other rights granted pursuant to
this Section 5, Xxxx Xxxxx or another representative of SG shall have the right
to attend all regular and special meetings of the Board of Directors of the
Company and any committees thereof, and in addition to such representative, the
SG Director shall have the right to attend all regular and special meetings of
any committees of the Board, in each case, as an observer. The visitation rights
set forth above shall include the right to receive the same notice and materials
provided to Board and committee members.
(e) Inconsistency with Organizational Documents. In the event that any
provision of the Company's Certificate of Incorporation or Bylaws or any
provision of the Operating Agreement is inconsistent with any provision of this
Section 5, the Company shall take such action as may be necessary to amend any
such provision to remedy such inconsistency.
9
6. Dispute Resolution Procedure. Promptly, but not later than five
days following the invocation of the Dispute Resolution Procedure, a dispute
resolution committee shall be formed consisting of one representative designated
by each of SG and the Company and a third committee member selected by mutual
agreement of SG's and the Company's representatives; provided that if either
party shall fail to designate a representative to serve on such committee within
such five-day period, the dispute shall be resolved by the representatives that
have then been designated. No member of the dispute resolution committee may be
Affiliated with any party to this Agreement. The dispute resolution committee
shall determine by majority vote the outcome of any matter submitted to it by
parties hereto in accordance with this Agreement. The decision of the dispute
resolution committee with respect to any matter properly submitted to it will be
final and binding on the parties. With respect to any particular matter for
which the Dispute Resolution Procedure is invoked, the procedure (including the
selection of the committee members and the formation of the committee) must be
completed within 30 days from the date on which the procedure is first invoked
in accordance with this Agreement; provided, that if the procedure is invoked in
connection with the selection of an investment banking firm pursuant to Section
7 below, the procedure (including the selection of the committee members and the
formation of the committee) must be completed within five business days from the
date on which the procedure is first invoked.
7. Valuation Procedure. Promptly following invocation of this
procedure (the "Valuation Procedure") in connection with the Buyout Procedure or
the repurchase right set forth in Section 9 (the "Repurchase Right"), SG and the
Company shall mutually agree on the selection of, and the Company shall retain,
at its expense, an investment banking firm for the purpose of determining the
fair market value of the Company Group and the common equity of the Company
based on customary enterprise valuation methodologies with no liquidity or
minority discounts. If the parties are unable to agree upon the selection of an
investment banking firm, then the decision shall be submitted to the Dispute
Resolution Procedure. The terms of the engagement of any investment banking firm
selected shall provide that such bank shall complete its valuation of the
Company Group within 30 days of the bank's engagement. The date on which the
investment banking firm submits its valuation report in accordance with this
Section 7 shall be the "Valuation Date".
8. Buyout Procedure. (a) Within 15 business days after the Valuation
Date, the Company shall give written notice (the "Buyout Notice") to SG that the
Company elects either (x) to purchase all of the outstanding capital stock of
Sub at a pro rata price per share based upon the fair market value of the
Company Group as set forth in the valuation report of the investment banking
firm with no liquidity or minority discounts (the "Buyout Price") or (y) to use
its best efforts to sell the Company Group or all or substantially all of the
assets of the Company Group, subject to Section 12, to a third party in a manner
consistent with achieving the highest possible price per share in such sale. SG
shall have the right within three business days of receipt of the Buyout Notice
to offer, in its sole discretion, by written notice to the Company, to purchase
the MCM Shares at a price per share higher than the Buyout Price. In the event
of such higher offer by SG, the Company shall elect by written notice to SG
within two business days after such notice by SG either (1) to purchase all of
the outstanding capital stock of Sub at a pro rata price per share based on such
higher price per share offered by SG or (2) to sell the MCM Shares to SG at such
higher price per share offered by SG. Notwithstanding the foregoing,
10
if the Company is proceeding with a sale to a third party, the Company shall use
its best efforts to allow SG to participate in such sale process as a bidder on
the same basis as any other bidder and shall provide SG with the same
information about the bidding process, the Company's financial condition and any
other material information provided to any other bidder in such sale.
(b) If the Company is purchasing all of the outstanding capital
stock of Sub, the closing of such sale must take place not later than three
calendar months from the Buyout Notice. At closing, the Company shall pay the
aggregate purchase price for Sub as follows: (A) as much as reasonably
practicable in the Company's best business judgement but at least 25% shall be
paid in cash and (B) the remainder shall be paid in the form of a junior
subordinated promissory note substantially in the form of Exhibit A hereto.
(c) If SG is purchasing the MCM Shares, the closing of such sale
must take place not later than four calendar months from the Buyout Notice. At
closing, SG shall pay the aggregate purchase price for the MCM Shares as
follows: (A) as much as reasonably practicable in the Company's best business
judgement but at least 50% shall be paid in cash and (B) the remainder shall be
paid in the form of a junior subordinated promissory note substantially in the
form of Exhibit A hereto.
(d) If the result of the Buyout Procedure is, subject to Section 12,
a sale of the Company Group or all or substantially all of the Company Group's
assets, the Company shall cause the closing of such a sale to take place not
later than the six-month anniversary of the Buyout Notice and such sale shall be
subject to the terms and conditions applicable to such sale set forth in Section
12. If such sale shall not have been consummated on or before the six-month
anniversary of the Buyout Notice, the Company shall purchase all of the issued
and outstanding capital stock of Sub at the Buyout Price on such six-month
anniversary and the Company shall pay the aggregate purchase price for the
capital stock of Sub on the terms set forth in Section 8(b), provided that if
the Company shall have failed to make a good faith effort to sell the Company,
the aggregate purchase price for the capital stock of Sub shall be paid in cash
on such six-month anniversary.
(e) (i) If SG or the MCM Parties, as the case may be, fails to make
any cash payment due (other than for payment of the promissory note), in
accordance with subsections (b), (c) and (d) above, the defaulting party shall
immediately take such actions (including voting all of the Common Stock of the
Company then held by such party) to replace a majority of the Board of Directors
of the Company with representatives of the non-defaulting party, which
representatives shall hold such office until such time as the cash payment is
paid in full; provided, however, that on the six-month anniversary of such
event, if the non-defaulting party remains in control of the Board of Directors,
the defaulting party shall be granted the same rights of approval over
Significant Actions that SG has hereunder.
(ii) If any Shareholder fails or refuses to vote its Common Stock of
the Company as required by this Section 8(e), SG shall have an IRREVOCABLE PROXY
of indefinite duration pursuant to the provisions of Section 212 of the Delaware
General Corporate Law, coupled with an interest, so to vote such Common Stock in
accordance with this Section 8(e) and each Shareholder hereby grants to SG such
irrevocable proxy.
11
9. Repurchase Right. (a) On the date of the earlier to occur of (x)
the fifth anniversary of the date hereof and (y) a Change of Control, SG may
require the Company to purchase all of the outstanding capital stock of Sub (the
"Repurchase Right") at a pro rata price per share of Sub (with no minority or
liquidity discounts) based on the fair market value of the shares of KCLLC owned
by Sub (with no minority or liquidity discounts) and the fair market value of
the Company Group determined in accordance with the Valuation Procedure (the
"Repurchase Option Price"); provided, however, that if SG intends to exercise
the Repurchase Right on the fifth anniversary pursuant to clause (x) above, SG
must give the Company written notice (the "Repurchase Election Notice") of such
election not later than six calendar months before such fifth anniversary.
(b) Notwithstanding the foregoing, if, within 30 calendar days of
receipt of a Repurchase Election Notice, the Company shall give written notice
to SG of its intent to use its best efforts to sell the Company Group or all or
substantially all of its assets in a manner consistent with achieving a
reasonable price for the business of the Company Group in such sale, then (x)
the Company shall not be obligated to purchase all of the capital stock of Sub
until three calendar months after the fifth anniversary of the date hereof and
(y) SG shall agree to sell the outstanding capital stock of Sub to a third party
on or before such date in any sale in which (i) the purchase price paid to SG is
paid in cash or in Freely Marketable Securities or in a combination of both,
(ii) all of the outstanding capital stock of Sub is purchased, and (iii)
includes the terms and conditions applicable to such sale set forth in Section
12. Notwithstanding the foregoing, if the Company is proceeding with a sale to a
third party, the Company shall use its best efforts to allow SG to participate
in such sale process as a bidder on the same basis as any other bidder and shall
provide SG with the same information about the bidding process, the Company's
financial condition and any other material information provided to any other
bidder in such sale.
10. Drag-Along Obligation. Subject to the right of first refusal set
forth in Section 11 below, in the event that any Person or Persons (as such term
is defined in Section 13(d) of the Exchange Act) desires to acquire at least 51%
of the Total Equity Interest in the Company at such date, whether directly or
indirectly, and the MCM Parties approve of such acquisition, at the election of
the MCM Parties, SG agrees to sell a pro rata portion of Sub's outstanding
capital stock (based on the portion of the MCM Shares being sold in such sale)
to such Person or Persons and to execute and deliver all such documents and
instruments and take all such other actions as may be reasonably necessary to
effectuate such sale; provided that such sale shall be subject to the terms and
conditions applicable to such sale set forth in Section 12.
11. Transfers of Equity Securities. (a) Except as provided in
paragraph (b) of this Section 11, and in Section 15, no holder of any Equity
Securities who is party to this Agreement (each a "Shareholder") may sell,
assign, pledge or otherwise transfer in whole or in part ("Transfer") its Equity
Securities except in accordance with the terms of this Agreement or to a member
of such Person's Shareholder Group. All buyers, assignees and other transferees
shall be subject to the requirements of becoming a party to this Agreement. Any
sale, assignment or other transfer that is not in compliance with this Section
shall be null and void.
(b) Transfers to Non Shareholders. Until the occurrence of a Change
of Control, if any Shareholder receives and intends to accept a bona fide offer
from a person who is
12
not a party to this Agreement (a "Purchaser") to purchase all or part of such
Shareholder's Equity Securities (the "Offered Shares"), such Shareholder (each,
in the circumstances of this Section 11(b), a "Selling Shareholder") may
Transfer all or a part of such Selling Shareholder's Equity Securities in
accordance with the following procedures:
(i) Right of First Refusal. The Selling Shareholder shall deliver to
the other Shareholders (the "Other Shareholders") a written notice
offering the Offered Shares to the Other Shareholders at the purchase
price and on the terms specified in the written notice. Each Other
Shareholder shall have the first right and option, for a period of 30 days
after delivery of such written notice, to purchase such Other
Shareholder's pro rata portion of the Offered Shares at the purchase price
and on the terms specified in the notice. Each Other Shareholder shall
initially have the right to purchase a number of the Offered Shares which
shall not exceed the product of (x) the number of Offered Shares and (y)
such Shareholder's percentage of the Total Equity Interest in the Company
(without giving effect to any rights of conversion, exercise or exchange
relating to Common Stock other than the Exchange Right). Such acceptance
shall be made by delivering a written notice to the Selling Shareholder
within such 30-day period. If any Other Shareholder does not elect to
purchase all of such Other Shareholder's pro rata share of the Offered
Shares, then the remaining Other Shareholders shall have the option for 10
days after the expiration of such 30-day period to elect to purchase, on a
pro rata basis, any Offered Shares not purchased by such Other
Shareholder. Unless the Other Shareholders agree, in the aggregate, to
purchase all and not less than all of the Offered Shares, the Selling
Shareholder, subject to the tag along right set forth in Section
11(b)(ii), may sell the Offered Shares to such third party at a price not
less than the price, and on terms not more favorable to the Purchaser than
the terms, stated in the original written notice of intention to sell sent
by the Selling Shareholder to the Other Shareholders.
(ii) Tag Along Rights. (A) If (1) the Other Shareholders do not
elect to purchase the Offered Shares and (2) the Offered Shares represent
5% or more of the Total Equity Interest in the Company then the Selling
Shareholder shall cause the Purchaser's offer to be reduced to a writing
containing all of the material terms and conditions thereof including an
offer to purchase a pro rata portion of the Other Shareholders' Equity
Securities from the Other Shareholders on the terms and subject to the
conditions set forth in Section 12, (the "Offer"). The Selling Shareholder
shall give written notice of the Offer and a copy of the Offer to the
Other Shareholders, which Offer shall be irrevocable for a period of 30
days after delivery. The Other Shareholders may accept the Offer to
purchase a pro rata portion of their Equity Securities (determined in
accordance with Section 11(b)(ii)(B)) by furnishing within such 30-day
period to the Selling Shareholder written notice of such acceptance and
any other instrument necessary to effect the sale (each such Other
Shareholder, an "Accepting Offeree").
(B) Each Accepting Offeree shall have the right to sell to the
Purchaser a number shares of Equity Securities of the member of the
Company Group being purchased by the Purchaser (or, in the case of
Sub, a pro rata number of shares of the outstanding capital stock of
Sub based on the number of Shares of KCLLC
13
then owned by Sub) which shall not exceed the product of (x) the
number of Offered Shares and (y) such Accepting Offeree's percentage
of the Total Equity Interest in the Company (without giving effect
to any rights of conversion, exercise or exchange relating to Common
Stock other than the Exchange Right). The Selling Shareholder shall
reduce the Offered Shares to be sold by it accordingly to allow for
the sale of the Accepting Offerees' Equity Securities, and thereupon
take such steps on its own behalf and on behalf of the Accepting
Offerees to consummate the sale pursuant to the terms thereof. The
Selling Shareholder shall not sell all or any portion of its Equity
Securities to any Purchaser unless such Purchaser also purchases the
pro rata portion of the Equity Securities of the Accepting Offerees
at the same price and pursuant to the same terms and conditions as
offered to the Selling Shareholder except as set forth in Section
12.
(C) The Selling Shareholder may deduct from the sales price payable
to the Accepting Offerees such Accepting Offerees' pro rata share of
the out-of-pocket fees and expenses payable in respect of the
completion of such sale, including reasonable brokers', legal and
accounting fees and expenses.
(D) If any Other Shareholder has not accepted the Offer by the end
of the 30-day period, such Other Shareholder shall be deemed to have
waived any and all rights with respect to the Offer and the Selling
Shareholder shall have 45 days in which to sell the Offered Shares
on the same terms and subject to the same conditions as were set
forth in the Offer. If, at the end of such 45-day period, the
Selling Shareholder has not completed a sale pursuant to the Offer,
the Selling Shareholder shall return to the Other Shareholders any
instruments delivered by such Other Shareholders, and the
obligations of this Section 11(b) shall be reinstated.
12. Terms and Conditions of Sale. In the event of any sale of Equity
Securities or of the Company or all or substantially all of the assets of the
Company Group pursuant to Section 8(d), 9(b), 10 or 11(b), it shall be a
condition to the consummation of any such sale that:
(a) in each case, (i) such sale shall be structured so that (x) the
Company or the KCI Shareholders purchase all or, in the case of a partial sale
pursuant to Section 10 or 11(b)(ii), a pro rata portion of the outstanding
capital stock of Sub based on the number of Shares of KCLLC then owned by Sub,
prior to the consummation of such sale or (y) any purchaser in such sale is
required by the terms of the definitive purchase agreement to purchase all or
the relevant portion of the outstanding capital stock of Sub and (ii) SG shall
receive the same price per share of the Sub (pro rata based on the number of
Shares of KCLLC then owned by Sub) and form of consideration in such sale as is
received by the MCM Parties (including any consideration allocated to
non-competition agreements or to consulting agreements in which the compensation
is not commensurate with the nature of the consulting services to be provided,
but excluding consideration allocated to employment agreements and other
consulting agreements) on a pro rata basis (without regard to any control
premium or minority discount that may be applied); and
14
(b) (i) in the case of such sale pursuant to Xxxxxxx 00, XX shall
not be required to (A) make any representations and warranties to any Person in
connection with such sale, except as to (1) good title to the securities being
sold, (2) absence of claims with respect to the securities being sold, (3) its
valid existence and good standing (if applicable), (4) the authority and
authorization for, and validity, binding effect and enforceability of (as
against such holder), any agreement entered into by such Person in connection
with such sale and (5) customary representations and warranties regarding the
operations and liabilities of Sub, or (B) provide any indemnities in connection
with such sale except for breaches of the representations and warranties
specifically required under clause (A) above and (ii) in the case of such sale
pursuant to Section 8(d), 9(b) or 11(b)(ii), such sale shall be subject, on a
several and not joint basis, to the same representations and warranties,
covenants, indemnities, holdbacks and escrow provisions, if any, and any similar
components of the agreement to which the MCM Parties are subject; provided, that
(x) to the extent SG is required to provide indemnities in connection with the
transfer of the capital stock of Sub, SG shall not be required to provide
indemnification that would result in an aggregate liability to SG in excess of
SG's proceeds from the sale of the capital stock of Sub in such sale, (y) such
indemnities shall be made by SG severally and not jointly and (z) SG shall make
customary representations and warranties regarding the operations and
liabilities of Sub.
13. Preemptive Rights. (a) Except with respect to Exempt Issuances
(as defined in Section 13(c)), as long as any Equity Securities are outstanding
and until the occurrence of a Qualified IPO, before any issuance of (x) any
Equity Securities ("New Shares") or (y) any warrants, options or other rights to
acquire Equity Securities ("Rights") or notes, debentures or other securities
convertible into or exchangeable for Equity Securities ("Convertible
Securities"), the Company will deliver to SG a written notice (the "New Issuance
Notice") not more than 45 days, and not less than 30 days, prior to the date of
completion of such issuance (the "New Issuance") or, if earlier, the date of
execution of definitive documentation with respect thereto, stating the price
and other terms and conditions thereof. SG shall have the right (the "Preemptive
Right"), exercisable within 20 days of the receipt by SG of the New Issuance
Notice, to purchase (or be issued without consideration if the New Shares,
Rights or Convertible Securities to be issued in the New Issuance (the "New
Issuance Securities") are to be issued without consideration), in each case
through Sub, all or any part of its Pro Rata Share of the New Issuance
Securities at the price and on the terms on which the Company proposes to make
the New Issuance; provided, however, that if the Company proposes to issue any
notes, debentures or other debt securities of the Company to which are attached
any Rights exercisable for a nominal exercise price, SG may purchase (through
Sub) all or any part of its Pro Rata Share of such Rights by purchasing the
note, debenture or other debt security to which such Right is attached, in the
time period and at the price and terms (including payment therefor) specified
above for New Issuance Securities. Pro Rata Share means a number New Issuance
Securities such as will enable SG to maintain, on a fully diluted basis after
giving effect to such New Issuance, its percentage of the Total Equity Interest
in the Company represented by the SG Shares immediately prior to such issuance.
(b) If SG has not accepted the offer to purchase such New Issuance
Securities by the end of the 20-day period after receipt of the New Issuance
Notice, SG shall be deemed to have waived the Preemptive Right and the Company
may issue and sell such New Issuance
15
Securities on the same terms, subject to the same conditions, and by the closing
date of such New Issuance, each as was set forth in the New Issuance Notice. If,
by such closing date the Company has not completed the New Issuance, the
obligations of this Section 13 shall be reinstated.
(c) Notwithstanding Section 13(a), SG shall have no rights to
subscribe for New Issuance Securities issued by any member of the Company Group
in accordance with Section 5(c) (i) upon conversion or exercise of any
Convertible Securities or Rights set forth on Schedule I hereto, (ii) to
directors, officers, employees, advisors or consultants of the Company Group
pursuant to an incentive compensation, bonus, stock option, stock grant, stock
purchase or other similar plan or arrangement approved by the Board of Directors
of the Company, (iii) to equipment lessors, banks, financial institutions,
manufacturers, vendors, suppliers or similar entities in transactions approved
by the Board of Directors, the principal purpose of which is other than the
raising of capital, (iv) as consideration in connection with an acquisition by
the Company or one of its Subsidiaries on an arm's-length basis, (v) in a Change
of Control or merger involving the Company that is approved by the Board of
Directors, the principal purpose of which is other than the raising of capital,
(vi) that are issued with any debt securities of the Company, so long as the New
Issuance Securities represent in the aggregate less than 5% of the outstanding
equity of the Company Group, (vii) pursuant to an Initial Public Offering or
(viii) pursuant to a stock split, stock dividend, reclassification or other
distribution made on a pro rata basis to all holders of such Equity Securities
(each, an "Exempt Issuance").
14. Exchange and Veto Right. (a) Without the prior written consent
of SG, no initial public offering of Equity Securities shall be consummated if
immediately after such offering (i) Sub will hold directly or indirectly through
one or more intermediate entities equity securities in the IPO Vehicle and (ii)
SG will hold a direct or indirect equity interest in Sub (except to the extent
that such interest in Sub is held indirectly through SG's interest in the IPO
Vehicle).
(b) In the event of a proposed (i) initial public offering of Equity
Securities, or (ii) sale, exchange, or transfer (including by merger,
consolidation or otherwise) of any Equity Securities, SG shall have the right to
exchange shares of Sub for Equity Securities of the IPO Vehicle or the member of
the Company Group whose Equity Securities are proposed to be sold, exchanged or
transferred, as the case may be (the "Exchange Right"). The Company and the KCI
Shareholders covenant and agree that if, in the sole discretion of SG's
independent tax advisor, there is a substantial risk that the exercise by SG of
its Exchange Right could result in an SG Tax Detriment in connection with any
such proposed public offering, sale, exchange or transfer, then the Company and
the KCI Shareholders will use their commercially reasonable efforts to
restructure such proposed transaction so that the Exchange Right may be
exercised, in the opinion of SG's independent tax advisors, without an SG Tax
Detriment. Upon exercise by SG of the Exchange Right in the case of either a
proposed initial public offering of Equity Securities or a proposed sale,
exchange or transfer of all the Equity Securities of a member of the Company
Group, SG shall be issued in exchange for all the outstanding shares of Sub
pursuant to the Exchange Right, a number of Equity Securities of the IPO Vehicle
or of the member of the Company Group whose Equity Securities are proposed to be
sold, exchanged or transferred, as the case may be, such that the ratio (by
value) of the Equity Securities so issued to SG to all
16
Equity Securities outstanding (on a fully diluted basis) of the issuer of such
Equity Securities equals the Percentage Interest of Sub in KCLLC on a fully
diluted basis.
(c) For purposes of this Section 14, an "SG Tax Detriment" is any of
the following federal income tax consequences: (i) the recognition of gross
income by Sub, SG or any of SG's members, (ii) diminution in the tax basis of
assets in the hands of SG or (iii) failure of the holding period of property
received by SG to include the holding period of property transferred or
exchanged by SG therefor.
15. SBIC Regulatory Provisions. (a) Number of Shareholders As long
as the SBIC Holder holds Equity Securities, the Company shall notify the SBIC
Holder (a) at least 15 days prior to taking any action after which the number of
record holders of the Equity Securities would be increased from fewer than 50 to
50 or more, and (b) of any other action or occurrence after which the number of
record holders of the Equity Securities was increased (or would increase) from
fewer than 50 to 50 or more, as soon as practicable after the Company becomes
aware that such other action or occurrence has occurred or is proposed to occur.
(b) Access. In addition to any other rights granted hereunder, the
SBIC Holder and the SBA shall have reasonable access to the books and records of
the Company Group for the purposes enumerated in 13 CFR Section 107.620 of the
SBA Regulations.
(c) Economic Impact Information. As and when reasonably requested by
the SBIC Holder, the Company shall deliver to the SBIC Holder information
reasonably obtainable by the Company that would assist the SBIC Holder in
preparing a written assessment of the economic impact of the SBIC Holder's
investment in the Company, including as to the full-time equivalent jobs created
or retained in connection with the investment, the impact of such SBIC Holder's
capital contributions on the revenues Group and profits of the Company Group,
and on taxes paid by the Company and its employees.
(d) Regulatory Compliance Cooperation. In the event that the SBIC
Holder determines that it has a Regulatory Problem, the SBIC Holder shall have
the right to transfer the SG Shares without regard to any restriction on
transfer set forth in this Agreement other than the securities laws restrictions
(provided that the transferee agrees to become a party to this Agreement) and
the Company and the KCI Shareholders shall take all such actions as are
reasonably requested by the SBIC Holder in order to (a) effectuate and
facilitate any transfer by the SBIC Holder of the SG Shares to any Person
designated by the SBIC Holder, (b) permit the SBIC Holder (or any of its
Affiliates) to exchange all or any portion of the SG Shares on a share-for-share
basis for shares of a nonvoting security of the Company, which nonvoting
security shall be identical in all respects to the SG Shares exchanged for it,
except that it shall be nonvoting and shall be convertible into the SG Shares
exchanged for it on such terms as are requested by the SBIC Holder in light of
regulatory considerations then prevailing, (c) continue and preserve the
respective allocations of the voting interests with respect to the Company
arising out of the SBIC's ownership of Shares and/or provided in this Agreement
before the transfers and amendments referred to above (including entering into
such additional agreements as are requested by the SBIC Holder to permit any
Person(s) designated by the SBIC Holder reasonably acceptable to the Company to
exercise any voting power which is relinquished by the SBIC
17
Holder, and (d) amend this Agreement, and the other related agreements and
instruments to effectuate and reflect the forgoing.
16. Fees. (a) The Company shall pay SG an annual fee (the "SG Fee")
equal to the Applicable Percentage of the sum of (x) the excess of the annual
management fee paid to MCM under the Management Agreement over $500,000 and (y)
the SG Fee. The "Applicable Percentage" means 20% until the first anniversary of
the date hereof and thereafter SG's Percentage Interest (as defined in the
Operating Agreement) in KCLLC on the date such fee is accrued.
(b) If in any twelve-month period MCM is entitled to
transaction-related fees from the Company Group in excess of $200,000, the
Company shall pay SG a fee (the "SG Transaction Fee") in an amount equal to the
Applicable Percentage of the sum of such transaction related fee payable to MCM
and the SG Transaction Fee; provided, however, that, if the Company believes
that SG is not entitled to the full amount of such transaction fee (based upon
reasonable contribution by SG's staff to the work effort required for the
successful consummation of such transaction), the amount of the fee will be
determined using the Dispute Resolution Procedure. Notwithstanding the
foregoing, SG shall not be entitled to transaction fees for transactions
initiated by MCM prior to the date hereof.
(c) If after the receipt of the Company's unaudited financial
statements for the nine months ended September 30, 1999, the Company's EBITDA is
at least $26,200,000, MCM will receive a fee of $500,000 and SG will receive a
fee of $100,000.
17. Additional Equity Securities. In the event additional Equity
Securities are issued to any Shareholder at any time during the term of this
Agreement, either directly or upon the exercise or exchange of securities
exercisable for or exchangeable into Equity Securities, such additional Equity
Securities shall, as a condition to such issuance, become subject to the terms
and provisions of this Agreement.
18. Legend on Certificates. Each certificate representing shares of
Common Stock beneficially owned by the parties hereto shall bear the following
legend, until such time as the shares represented thereby are no longer subject
to the provisions hereof:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A SHAREHOLDER AGREEMENT, DATED AUGUST 31, 1999,
AMONG THE ISSUER AND THE OTHER SIGNATORIES THERETO, AND NO TRANSFER
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN CONTRAVENTION
OF SUCH AGREEMENT SHALL BE VALID OR EFFECTIVE. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER."
18
19. Term and Termination. This Agreement shall terminate (a) with
respect to all parties, upon the consummation of a Qualified IPO and (b) with
respect to any Shareholder, at the time such party ceases to own beneficially or
of record any Equity Securities (other than by reason of a breach of this
Agreement). Upon termination pursuant to clause (a) hereof, no party hereto
shall have any right or obligation hereunder in respect of any other party
hereto, except for breaches prior to such termination. Upon termination pursuant
to clause (b) hereof, no party who shall remain as a Shareholder shall have any
obligation to a party who ceases to hold any Equity Securities with respect to
the subject matter of this Agreement or the transactions contemplated hereby.
Notwithstanding the foregoing, Section 8(e) of this Agreement shall survive any
termination of this Agreement and remain enforceable in accordance with its
terms.
20. Reports to SG. The Company shall provide to SG as soon as such
information is available but not later than such information is provided to the
Company Group's senior lenders, quarterly and audited annual financial
statements, annual budgets and any other information provided to the Company
Group's senior lenders and other equity or debt investors (including copies of
monthly information).
21. Confidentiality. Without the written consent of the other
parties hereto, no party hereto shall disclose to any person any information
relating to the terms and conditions of the Operative Documents; provided,
however that this Section shall not prevent the disclosure of any information
that is required or compelled to be disclosed by law; and provided further that
the disclosing party shall provide prior notice of such requirement to the
non-disclosing party so that the non-disclosing party has a reasonable
opportunity to seek an appropriate protective order.
22. Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service
or sent by telex, graphic scanning or other telegraphic communications equipment
of the sending party, as follows:
(a) if to SG,
SGC Partners II LLC
c/o SG Capital Partners LLC
15th Floor
1221 Avenue of the Americas
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
19
(b) if to the Company or the KCI Shareholders,
Key Components, Inc.
000 Xxxxx Xxxxxx Xxxx
0xx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telecopier: (000) 000-0000
All notices and other communications given to either party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telex, graphic scanning or other telegraphic communications equipment
of the sender, in each case delivered or sent (properly addressed) to such party
as provided in this Section 22 or in accordance with the latest unrevised
direction from such party given in accordance with this Section 22.
23. Entire Agreement. This Agreement, the Purchase Agreement and the
Registration Rights Agreement contain the entire agreement among the parties
with respect to the transactions contemplated by this Agreement and supersede
all prior agreements and understandings among the parties with respect to the
subject matter hereof and thereof.
24. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of NEW YORK without regard
to conflicts of law principles.
25. CONSENT TO JURISDICTION. EACH OF THE PARTIES IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF (i) THE SUPREME COURT OF THE STATE OF NEW YORK,
NEW YORK COUNTY AND (ii) THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. EACH PARTY
FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENTS BY
UNITED STATES REGISTERED MAIL TO SUCH PARTY'S RESPECTIVE ADDRESS FOR NOTICES SET
FORTH IN SECTION 25 SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT
OR PROCEEDING IN NEW YORK WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED
TO JURISDICTION IN THIS SECTION 25. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY
20
ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN (a) THE SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK
COUNTY AND (b) THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, 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.
26. Descriptive Headings; Certain Interpretations.
(a) Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of the provisions of this
Agreement.
(b) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) a word importing
the masculine gender includes the feminine or neuter, (ii) the singular includes
the plural and the plural includes the singular; (iii) "or" and "any" are not
exclusive and "include" and "including" are not limiting; (iv) a reference to
any agreement or other contract includes permitted supplements and amendments;
(v) a reference to a law includes any amendment or modification to such law and
any rules or regulations issued thereafter; (vi) any reference to a person
includes its permitted successors and assigns; and (vii) a reference in this
Agreement to a Section is to the Section of this Agreement.
27. Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
28. Waivers; Rights and Remedies Cumulative. (i) The parties to this
Agreement acknowledge that damages at law would be an inadequate remedy for the
breach of any provision contained in this Agreement, and agree in the event of
such breach or threatened breach that the non-breaching party may (i) obtain
temporary and permanent injunctive relief restraining the breaching party from
such breach or threatened breach, and, to the extent permissible under the
applicable statutes and rules of procedure, that a temporary injunction may be
granted immediately upon the commencement of a proceeding commenced under this
Section 29 and (ii) enforce specifically such provisions in any legal
proceeding. Nothing contained in the preceding sentence shall be construed as
prohibiting any party from pursuing any other remedies available at law or in
equity for such breach or threatened breach of any such provision of this
Agreement.
(ii) The failure of any party to pursue any remedy for breach, or to
insist upon the strict performance, of any covenant or condition contained in
this Agreement shall not constitute a waiver thereof or of any other right with
respect to any subsequent breach. Except as
21
otherwise expressly set forth herein, rights and remedies under this Agreement
are cumulative, and the pursuit of any one right or remedy by any party shall
not preclude, or constitute a waiver of, the right to pursue any or all other
rights or remedies. All rights and remedies provided under this Agreement are in
addition to any other rights or remedies the parties may have by law, in equity
or otherwise.
29. Amendment and Waiver. No modification, amendment or waiver of
any provision of, or consent required by, this Agreement, nor any consent to any
departure from the terms of this Agreement, shall be effective unless it is in
writing and signed by the parties hereto. Such modification, amendment, waiver
or consent shall be effective only in the specific instance and for the purpose
given.
30. Further Assurances. Each party hereto hereby agrees to execute
and deliver all such other and additional instruments and documents and do all
such other acts and things as may be necessary to effectuate more fully this
Agreement and carry on the business contemplated herein.
31. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
KEY COMPONENTS, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
KEY COMPONENTS, LLC
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
SGC PARTNERS II LLC
By:
-------------------------------------
Name:
Title:
KEYHOLD, INC.
By:
-------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
KEY COMPONENTS, INC.
By:
-------------------------------------
Name:
Title:
KEY COMPONENTS, LLC
By:
-------------------------------------
Name:
Title:
SGC PARTNERS II LLC
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
KEYHOLD, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
KCI Shareholders:
/s/ Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx
XXXXXXX X. XXXXX 1976 TRUST
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name:
Trustee:
XXXXXXX X. XXXXX 1968 TRUST
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name:
Trustee:
XXXXXXXX XXXXX 1968 TRUST
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name:
Trustee:
________________________________________
Xxxx X. Xxxxxxxxxx
24
KCI Shareholders:
----------------------------------------
Xxxx X. Xxxxx
XXXXXXX X. XXXXX 1976 TRUST
By:
-------------------------------------
Name:
Trustee:
XXXXXXX X. XXXXX 1968 TRUST
By:
-------------------------------------
Name:
Trustee:
XXXXXXXX XXXXX 1968 TRUST
By:
-------------------------------------
Name:
Trustee:
/s/ Xxxx X. Xxxxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxxxx
24
/s/ Xxxx X. Xxxxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxx Xxxxxxxxxx under the
New York Uniform Gift to Minors Act
/s/ Xxxx X. Xxxxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxxxxxx Xxxxxxxxxx under the New
York Uniform Gift to Minors Act
________________________________________
Xxxx X. Xxxxxx
________________________________________
Xxxxx X. Xxxx
________________________________________
Xxxxxx Xxxxxxx
________________________________________
Xxxxxx X. Xxx
25
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxx Xxxxxxxxxx under the
New York Uniform Gift to Minors Act
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxxxxxx Xxxxxxxxxx under the New
York Uniform Gift to Minors Act
/s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
________________________________________
Xxxxx X. Xxxx
________________________________________
Xxxxxx Xxxxxxx
________________________________________
Xxxxxx X. Xxx
25
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxx Lifflander under the
New York Uniform Gift to Minors Act
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxxxxxx Xxxxxxxxxx under the New
York Uniform Gift to Minors Act
________________________________________
Xxxx X. Xxxxxx
/s/ Xxxxx X. Xxxx
----------------------------------------
Xxxxx X. Xxxx
________________________________________
Xxxxxx Xxxxxxx
________________________________________
Xxxxxx X. Xxx
25
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxx Lifflander under the
New York Uniform Gift to Minors Act
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxxxxxx Xxxxxxxxxx under the New
York Uniform Gift to Minors Act
________________________________________
Xxxx X. Xxxxxx
________________________________________
Xxxxx X. Xxxx
/s/ Xxxxxx Xxxxxxx
----------------------------------------
Xxxxxx Xxxxxxx
________________________________________
Xxxxxx X. Xxx
25
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxx Lifflander under the
New York Uniform Gift to Minors Act
----------------------------------------
Xxxx X. Xxxxxxxxxx as custodian for
Xxxxxx Xxxxxxx Xxxxxxxxxx under the New
York Uniform Gift to Minors Act
________________________________________
Xxxx X. Xxxxxx
________________________________________
Xxxxx X. Xxxx
________________________________________
Xxxxxx Xxxxxxx
/s/ Xxxxxx X. Xxx
----------------------------------------
Xxxxxx X. Xxx
25
