REGISTRATION RIGHTS AGREEMENT, dated as of September 1,
1999, of KEY COMPONENTS, LLC, a Delaware limited liability
company ("KCLLC"), KEY COMPONENTS, INC., a New York
corporation, the sole existing member of KCLLC (the
"Company"), SGC PARTNERS II LLC, a Delaware limited
liability company ("SG") and Keyhold, Inc., a Delaware
corporation and a wholly owned subsidiary of SG (the
"Investor").
----------------------------------------------------------
INTRODUCTION
The Company, KCLLC, SG and the Investor are entering into a Share
Purchase Agreement, dated as of August 12, 1999 (the "Purchase Agreement"),
pursuant to which, among other things, KCLLC is issuing, and the Investor is
acquiring, certain shares of KCLLC (the "Shares").
Simultaneously with the execution and delivery of this Agreement,
the parties are entering into a Shareholders Agreement, dated the date hereof
(the "Shareholders Agreement") pursuant to which SG and the Investor have
rights, among other rights, to exchange the issued and outstanding capital stock
of Sub (the "SG Shares") into equity securities of a member of the Company Group
that conducts an initial public offering of equity securities the ("IPO
Vehicle"). "Company Group" means KCI, 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.
The execution and delivery of this Agreement and the Shareholders
Agreement by the Company and KCLLC is a condition precedent to the obligations
of SG and the Investor under the Share Purchase Agreement.
Certain terms are defined in Section 15 of this Agreement.
In consideration of the foregoing, the covenants and obligations set
forth below, the parties agree as follows:
1. IPO Vehicle. The parties acknowledge and agree that the IPO
Vehicle may be an entity other than KCLLC or the Company. Each of the Company
and KCLLC covenant and agree that prior to the consummation of any initial
public offering of the equity securities of the IPO Vehicle, the Company and
KCLLC shall assign to the IPO Vehicle, and cause the IPO Vehicle to assume, all
of the obligations of the Company and KCLLC hereunder. In the event of such
assignment and assumption, all references herein to the Company or KCLLC shall
be deemed to be references to the IPO Vehicle, except where such construction
would be manifestly in error.
2. Registration on Request.
(a) Request. Subject to the conditions herein set forth, at any time
after (1) the six-month anniversary of the effective date of the Company's
registration statement for an Initial Public Offering of equity securities of
the IPO Vehicle with gross proceeds to the IPO Vehicle of not less than
$50,000,000 or (2) any date subsequent to an underwritten Initial Public
Offering of equity securities of the IPO Vehicle and any subsequent offerings of
equity securities of the IPO Vehicle on which the Public Float with respect to
such equity securities of the IPO Vehicle is $75,000,000 or more, a Holder or
Holders (as defined in Section 15(b)) may require upon written notice to the
Company, the Company to effect the registration under the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act") of all or part of the Registrable Securities (as defined in
Section 15(b)) then held by such requesting Holder or Holders; provided that
such Registrable Securities have a value, based upon the closing price of the
IPO Vehicle's Equity Securities on the day preceding the date of request, of at
least $5,000,000. The Company promptly will give written notice of such
requested registration to all other Holders of Registrable Securities who may
join pro rata in such registration, and thereupon use its reasonable best
efforts to effect, on the earliest possible date, the registration under the
Securities Act for public sale (in accordance with the method of disposition
specified in the notice from the requesting Holders), of the Registrable
Securities that the Company has been requested to register by such requesting
Holders.
(b) Limitations. Notwithstanding anything in this Section 2(a) to
the contrary, in no event shall the Company be required:
(i) to effect a registration pursuant to Section 2(a) within
60 days after the effective date of a registration statement (a "Registration
Statement") filed by the Company with the Securities and Exchange Commission
(the "Commission") for a public offering and sale of equity securities of the
Company (other than a registration of securities (A) pursuant to a Registration
Statement on Form S-8 or Form S-4, any Registration Statement covering only
securities proposed to be issued in exchange for securities or assets of another
corporation or any Registration Statement relating solely to employee stock
option, stock purchase, benefit or similar plans (a "Special Registration
Statement") or (B) effected pursuant to a Registration Statement on Form S-3);
provided that the Company shall use its best efforts to achieve effectiveness of
a registration requested hereunder promptly following such 60 day period if such
request is made during such 60 day period; and
(ii) to effect, in the aggregate, more than two registrations
pursuant to this Section 2;
(c) Effective Registration Statement. A registration requested
pursuant to this Section 2 shall not be deemed to have been effected, and shall
not be deemed a requested registration for purposes of Section 2, (i) unless a
Registration Statement covering at least 90% of the Registrable Securities
specified in the notices from the requesting Holders (and not subsequently
withdrawn from registration by the requesting Holders) has become effective and
2
remained effective in compliance with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
Registration Statement for the requisite time period as set forth in this
Agreement, (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason not
attributable to the Holders, or (iii) if the conditions to closing specified in
the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the Holders; provided, however, that if in the good faith judgment
of the managing underwriter of any underwritten offering, the inclusion of 90%
of the Registrable Securities specified in the notices from the requesting
Holder would adversely affect the successful marketing of the proposed offering,
then (i) the Holders may elect to proceed with such registration of such reduced
number of Registrable Securities in which case, subject to the conditions set
forth above, such registration shall be deemed a requested registration for the
purpose of Section 2 or (ii) the Holders may elect to withdraw such
registration, in which case, unless the Holders elect to reimburse the Company
for 100% of the expenses incurred in connection with such registration, such
registration shall also be deemed a requested registration for the purpose of
Section 2.
(d) Priority in Requested Registration. The Company shall have the
right to include in any Registration Statement initiated by the Holders pursuant
to this Section 2, for sale in accordance with the method of disposition
specified by the requesting Holders, securities to be sold by the Company for
its own account and registrable securities to be sold by any other stockholder
("Other Holders"). If, in the good-faith judgment of the managing underwriter of
any underwritten offering, if any, the inclusion of all of the Registrable
Securities requested for inclusion pursuant to Section 2(a) would adversely
affect the successful marketing of the proposed offering or a reduction in the
number of shares of equity securities of the IPO Vehicle to be sold is otherwise
advisable, then the number of shares of equity securities of the IPO Vehicle to
be included in the offering shall be reduced to the required level as follows:
(i) in the first such requested registration, on a pro rata basis, securities to
be sold by the Holders, the Company and the Other Holders, based on the total
number of shares of securities owned by such Persons; and (ii) in the second
requested registration, first, by excluding securities to be sold by the Company
for its own account, second, by reducing the participation of Other Holders of
securities in such offering pro rata among such Other Holders of securities in
such offerings based upon the total number of securities owned by such Other
Holders, and third, by reducing the participation of the Holders in such
offering pro rata among such Holders, based upon the total number of shares of
Registrable Securities owned by such Holders. Except for Special Registration
Statements, the Company shall not cause any other Registration Statement with
respect to its securities for its own account to become effective less than 120
days after the effective date of any registration requested pursuant to this
Section 2.
(e) Selection of Underwriters. The underwriter or underwriters of
each underwritten offering of the Registrable Securities so to be registered
shall be selected by the Company and shall be reasonably acceptable to the
Selling Holders of more than 50% of each class of securities to be included in
such registration.
3
(f) Registration on Form S-3. Following an Initial Public Offering,
the Company shall use its best efforts to become eligible to use the
Registration Statement on Form S-3 for public offerings of its capital stock.
3. Incidental Registration.
(a) Right to Include Registrable Securities. If at any time after an
Initial Public Offering the Company proposes to register any shares of capital
stock under the Securities Act, whether or not for sale of its own account, on a
form and in the manner that would permit registration of Registrable Securities
for the sale to the public under the Securities Act (other than in connection
with Special Registration Statements), the Company shall give written notice to
all Holders of its intention to do so. Upon the written request of a Holder
given within 20 days after the giving of any such notice by the Company, the
Company shall use its reasonable best efforts to cause to be included in such
Registration Statement all of the Registrable Securities requested by Holders;
provided that if any Person other than the Company offers any Equity securities
of the IPO Vehicle for sale in connection with an Initial Public Offering, then
the Holders shall have the right to offer a pro rata portion of the Registrable
Securities for sale based on the number of shares of equity securities of the
IPO Vehicle owned by all shareholders of the Company immediately prior to the
Initial Public Offering. If the Registration Statement is to cover, in whole or
in part, any underwritten distribution, the Company shall use its reasonable
best efforts to cause the Registrable Securities requested for inclusion
pursuant to this Section to be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
(b) Priority in Incidental Registrations. If, in the good-faith
judgment of the managing underwriter of any underwritten offering, if any, the
inclusion of all of the Registrable Securities requested for inclusion pursuant
to Section 3(a) would adversely affect the successful marketing of the proposed
offering or a reduction in the number of shares of Equity Securities of the IPO
Vehicle to be sold is otherwise advisable, then the number of shares of Equity
Securities of the IPO Vehicle to be included in the offering shall be reduced to
the required level as follows: (i) no reduction shall be made in the number of
securities to be registered for the account of the Company; and (ii) each Holder
and Other Holder shall be reduced pro rata based on the total number of shares
of Registrable Securities owned by such Persons.
4. Registration Procedures. If and whenever the Company is required
by the provisions of Sections 2 or 3 to effect the registration of Registrable
Securities under the Securities Act, the Company shall, at its expense, as
expeditiously as possible:
(i) use best efforts to prepare and file with the Commission a
Registration Statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such Registration Statement to become
effective; provided that the Company may discontinue any registration of its
securities which is being effected pursuant to Section 3 at any time prior to
the effective date of the Registration Statement;
4
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
a period not in excess of 120 days (except with respect to any Registration
Statement filed pursuant to Rule 415 under the Securities Act if the Company is
eligible to file a Registration Statement on Form S-3, in which case the Company
shall use its best efforts to keep such Registration Statement effective and
updated until such time as all of the Registrable Securities covered by such
Registration Statement have been disposed of in accordance with the intended
methods of disposition by the seller or sellers set forth in such Registration
Statement) and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement; provided that before filing a Registration Statement or prospectus,
or any amendments or supplements thereto, the Company will furnish to one
counsel selected by the Holders of a majority of the Registrable Securities
covered by such Registration Statement to represent all Holders of Registrable
Securities covered by such Registration Statement, copies of all documents
proposed to be filed, which documents will be subject to the review of such
counsel;
(iii) furnish to each seller of such Registrable Securities
such number of copies of such Registration Statement and of each amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such Registration Statement (including each
preliminary prospectus and summary prospectus), and any other prospectus filed
under Rule 424 under the Securities Act in conformity with the requirements of
the Securities Act, and such other documents as such seller may reasonably
request;
(iv) use its best efforts to register or qualify such
Registrable Securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller, except that the Company shall not for any such purpose be required (a)
to qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this clause (iv), it would not be obligated
to be so qualified or (b) to consent to general service or process in any such
jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Securities;
5
(vi) cause senior representatives of the Company to
participate in any "road show" or "road shows" reasonably requested by any
underwriter of an underwritten or "best efforts" offering of any Registrable
Securities;
(vii) notify each seller of any such Registrable Securities
covered by such Registration Statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the Company's
becoming aware that the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller, prepare and furnish to such
seller a reasonable number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the sellers of such
Registrable Securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable (but not more than 18
months) after the effective date of the Registration Statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the Securities
Act and the rules and regulations promulgated thereunder;
(ix) use its best efforts to list such Registrable Securities
on any securities exchange on which capital stock of the same class is then
listed, if such Registrable Securities are not already so listed and if such
listing is then permitted under the rules of such exchange, and to provide a
transfer agent and registrar for such Registrable Securities covered by such
Registration Statement not later than the effective date of such Registration
Statement;
(x) enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions as sellers
of a majority of such Registrable Securities or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(xi) obtain a "cold comfort" letter or letters from the
Company's independent public accountants in customary form and covering matters
of the type customarily covered by "cold comfort" letters as the seller or
sellers of a majority of such Registrable Securities shall reasonably request;
(xii) obtain an opinion of counsel for the Company in
customary form and covering matters of the type customarily covered in opinions
of issuer's counsel as the Sellers shall reasonably request; and
(xiii) make available for inspection by any seller of such
Registrable Securities covered by such Registration Statement, by any
underwriter participating in any disposition to be effected pursuant to such
Registration Statement and by any attorney,
6
accountant or other agent retained by any such seller or any such underwriter,
all pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company's officers, directors
and employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such Registration
Statement.
5. Expenses. With respect to each registration effected pursuant to
Sections 2 or 3, all Registration Expenses (defined below) in connection with
such registration and the public offering in connection therewith shall be borne
by the Company; provided that security holders participating in any such
registration shall bear their pro rata share of the underwriting discounts and
selling commissions (on the basis of the number of Registrable Securities of
each such person included and sold in such registration). "Registration
Expenses" means any and all expenses incident to performance of or compliance
with this Agreement, including, without limitation, (i) all registration and
filing fees of the Commission, a stock exchange or the National Association of
Securities Dealers, Inc., (ii) all fees and expenses of complying with
securities or blue sky laws (including fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities) unless paid by the underwriters, (iii) all printing, messenger and
delivery expenses, (iv) all fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange pursuant to
Section 4(ix), (v) the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, (vi) the reasonable fees and disbursements of one counsel selected
by the Holders of a majority of the Registrable Securities being registered to
represent all Holders of the Registrable Securities being registered in
connection with each such registration, (vii) any fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities, including
fees and disbursements of counsel for the underwriters, but excluding
underwriting discounts and commissions, (viii) liability insurance if the
Company so desires or if the underwriters so require, and (ix) the reasonable
fees and expenses of any special experts retained by the Company in connection
with the requested registration.
6. Indemnification and Contribution.
(a) Indemnification by the Company. In the event of a registration
of any shares of Registrable Securities pursuant to Section 2 or 3, the Company,
to the extent permitted by law, will indemnify and hold harmless each Holder of
such shares of Registrable Securities included in a Registration Statement
pursuant to the provisions of this Agreement and any underwriter (as defined in
the Securities Act) of such Registrable Securities and each other person, if
any, who controls such Holder or such underwriter within the meaning of the
Securities Act, and their respective directors, officers, partners, members,
agents and affiliates (the "Holders' Affiliates") , and each of their successors
from and against, and will reimburse such Holder and each such underwriter,
controlling person and Holders' Affiliate with respect to, any and all claims,
actions, demands, losses, damages, liabilities, costs and expenses to which such
Holder, underwriter, controlling person or Holders' Affiliate may become subject
under the Securities Act or otherwise, including, without limitation, the
reasonable fees and expenses of
7
legal counsel (including those incurred in connection with any claim for
indemnity hereunder) insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses (or actions, or proceedings, whether commenced or
threatened in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement under which securities were registered under the
Securities Act, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or arise out of any violation by the
Company of any rule or regulation under the Securities Act or any state
securities laws applicable to the Company and relating to action or inaction
required of the Company in connection with such registration; provided that the
Company will not be liable in any case to the extent, but only to the extent,
that any such claim, action, demand, loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or omission so made in
reliance upon and in strict conformity with information furnished in writing by
such Holder or such underwriter specifically for use in the preparation thereof
and provided, further, that the Company shall not be liable to any person who
participates as a underwriter in the offering or sale of Registrable Securities
or any other person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
action, demand, loss, damage, liability, cost or expense arises out of such
person's failure to send or give a copy of the final prospectus, as the same may
be then supplemented or amended and furnished to such person for distribution in
accordance with the terms of this Agreement, to the person asserting an untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus which was furnished
to such person for distribution in accordance with the terms of this Agreement.
It is agreed that this indemnity shall not apply to amounts paid in settlement
of any such claim, action, demand, loss, damage, liability, cost or expense if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld). This indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such Holder,
underwriter, controlling person or Holders' Affiliate and shall survive the
transfer of such securities by such Holder.
(b) Indemnification by the Holders. Each Holder of shares of
Registrable Securities, severally and not jointly, which shares are included in
a registration pursuant to the provisions of this Agreement, to the extent
permitted by law, will indemnify and hold harmless the Company, each person, if
any, who controls the Company within the meaning of the Securities Act, each
officer of the Company who signs the Registration Statement including such
Registrable Securities, each director of the Company, each underwriter and any
person who controls the underwriter and each of their successors from and
against, and will reimburse the Company and such officer, director, underwriter
or controlling person with respect to, any and all claims, actions, demands,
losses, damages, liabilities, costs or expenses to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such claims, actions, demands,
losses, damages, liabilities, costs or expenses arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in such Registration Statement, any prospectus contained therein or any
8
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading; provided that such Holder
will be liable in any such case to the extent, but only to the extent, that any
such claim, action, demand, loss, damage, liability, cost or expense arises out
of or is based upon an untrue statement or omission made in reliance upon and in
strict conformity with written information furnished by such Holder specifically
for use in the preparation thereof. The liability of each Holder under this
Section shall be limited to the proportion of any such claim, action, demand,
loss, damage, liability, cost or expense which is equal to the proportion that
the public offering price of the shares of Registrable Securities sold by such
Holder under such Registration Statement bears to the total offering price of
all securities sold thereunder, but not, in any event, to exceed the proceeds
received by such Holder from the sale of shares of Registrable Securities
covered by the Registration Statement. It is agreed that this indemnity shall
not apply to amounts paid in settlement of any such claim, action, demand, loss,
damage, liability, cost or expense if such settlement is effected without the
consent of the Holder (which consent shall not be unreasonably withheld). This
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Holder, underwriter or any such director, officer,
partner, member, agent or controlling person and shall survive the transfer of
such securities by such Holder.
(c) Notices of Claims, etc. Promptly after receipt by a party to be
indemnified pursuant to the provisions of this Section 6(a) or (b) (an
"indemnified party") of notice of the commencement of any action involving the
subject matter of the foregoing indemnity provisions, such indemnified party
will, if a claim thereof is to be made against the indemnifying party pursuant
to the provisions of this Section 6(a) or (b), notify the indemnifying party of
the commencement thereof, but the omission to so notify the indemnifying party
will not relieve it from any liability which it may have to an indemnified party
otherwise than under this Section and shall not relieve the indemnifying party
from liability under this Section unless such indemnifying party is prejudiced
by such omission. In case such action is brought against any indemnified party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after the notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of this Section 6(a) and (b) for any legal expense subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided that, if the defendants in any
such action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded on advice of counsel that
there may be reasonable defenses available to it that are different from or
additional to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of not more than one
such separate counsel
9
and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred. No indemnifying party shall be liable to an
indemnified party for any settlement of any action or claim without the consent
of the indemnifying party and no indemnifying party may unreasonably withhold
its consent to any such settlement. No indemnifying party will, except with the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
(d) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, any underwriter or
controlling person of any such Holder or underwriter, or any Holders' Affiliate,
makes a claim for indemnification pursuant to this Section but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section provides for indemnification in such
case, or (ii) contribution under the Securities Act may be required on the part
of any such Holder, underwriter, controlling person or Holders' Affiliate in
circumstances for which indemnification is provided under this Section 6, then,
and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and of the Holder of
Registrable Securities on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the holder of Registrable Securities on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand or by the Holder of Registrable Securities on the other, and each party's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided that, in any such case, (A) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation and (B)
no such Holder will be required to contribute any amount in excess of the
proceeds received by such Holder from the sales of Registrable Securities
covered by the Registration Statement.
(e) Other Indemnification. Notwithstanding the foregoing, to the
extent that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
7. Reporting Requirements Under Securities Exchange Act of 1934.
10
(a) Exchange Act Reporting. When it is first legally required to do
so, the Company shall register its capital stock under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and shall keep
effective such registrations and shall timely file such information, documents
and reports as the Commission may require or prescribe under Section 13 of the
Exchange Act. From and after the effective date of the first Registration
Statement filed by the Company, the Company shall (whether or not it shall then
be required to do so) timely file such information, documents and reports as the
Commission may require or prescribe under Section 13 or 15(d)(whichever is
applicable) of the Exchange Act.
(b) Furnishing Information to Holders. Immediately upon becoming
subject to the reporting requirements of either Section 13 or 15(d) of the
Exchange Act, the Company shall forthwith upon request furnish any Holder of
Registrable Securities (a) a written statement by the Company that it has
complied with such reporting requirements, (b) a copy of the most recent annual
or quarterly report of the Company, and (c) such other reports and documents
filed by the Company with the Commission as such Holder may reasonably request
in availing itself of an exemption for the sale of Registrable Securities
without registration under the Securities Act.
(c) Rule 144 and Form S-3. The Company acknowledges and agrees that
the purposes of the requirements contained in this Section 7 are (i) to enable
any such Holder to comply with the current public information requirement
contained in paragraph (c) of Rule 144 under the Securities Act should such
Holder ever wish to dispose of any of the securities of the Company acquired by
it without registration under the Securities Act in reliance upon Rule 144 (or
any other similar or successor exemptive provision), and (ii) to qualify the
Company for the use of Registration Statements on Form S-3. In addition, the
Company shall take such other measures and file such other information,
documents and reports as shall hereafter be required by the Commission as a
condition to the availability of Rule 144 under the Securities Act (or any
similar or successor exemptive provision hereafter in effect) and the use of
Form S-3. The Company also covenants to use its reasonable best efforts, to the
extent that it is reasonably within its power to do so, to qualify for the use
of Form S-3. From and after the effective date of the first Registration
Statement filed by the Company, the Company agrees to use its reasonable best
efforts to facilitate and expedite transfers of Registrable Securities by
Holders pursuant to Rule 144 under the Securities Act (or any similar or
successor exemptive provision hereafter in effect), which efforts shall include
timely notice to its transfer agent to expedite such transfers of Registrable
Securities.
8. Other Registration Rights.
(a) The Company may grant to subsequent investors in the Company
rights of incidental registration (such as those rights provided in Section 3);
provided, that such rights are consistent with the limitations set forth in
Section 3.
(b) If the Company at any time grants to any other holders of equity
securities of the IPO Vehicle any rights more favorable to such holders than the
terms set forth in this
11
Agreement, the terms of this Agreement shall be deemed amended or supplemented
to the extent necessary to provide the Holders such more favorable rights and
benefits.
9. Blackout Periods. Notwithstanding any other provision in this
Agreement to the contrary, the Company's obligation to file a Registration
Statement, or cause such Registration Statement to become and remain effective,
shall be suspended for not more than one period not to exceed an aggregate of 90
days in any 12-month period if the Company shall furnish to Holders a
certificate signed by the president of the Company stating that in reasonable
judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its stockholders for such registration to be
effected at such time due to pending Company events.
10. Stockholder Information. The Company may require each Holder of
Registrable Securities as to which any registration is to be effected pursuant
to this Agreement to, and as a condition to the obligations of the Company
hereunder, such Holder shall, furnish the Company in a timely manner such
information with respect to such Holder and the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing
and as shall be required by law or by the Commission in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration.
11. Calculation of Percentage Interests in Registrable Securities.
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated based upon the number of shares of
Registrable Securities outstanding at the time such calculation is made.
12. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
Without limiting the generality of the foregoing, the Company will not hereafter
enter into any agreement with respect to its securities that grants, or modify
any existing agreement with respect to its securities to grant, to the holder of
its securities in connection with an incidental registration of such securities
higher priority to the rights granted to the Investors under Section 2(e).
13. Certain Distributions. The Company shall not at any time make a
distribution on or with respect to the equity securities of the IPO Vehicle
(including any such distribution made in connection with a consolidation or
merger in which the Company is the resulting or surviving corporation and such
Registrable Securities are not changed or exchanged) of securities of another
issuer if Holders of Registrable Securities are entitled to receive such
securities in such distribution as Holders of Registrable Securities and any of
the securities so distributed are registered under the Securities Act, unless
the securities to be distributed to the Holders of Registrable Securities are
also registered under the Securities Act.
14. Specific Enforcement. All of the parties acknowledge that the
parties will be irreparably damaged in the event that this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement by any of the
12
parties hereto, the other parties shall, in addition to all other remedies, be
entitled to a temporary or permanent injunction, without showing any actual
damage, or a decree for specific performance, in accordance with the provisions
of this Agreement.
15. Descriptive Headings; Definitions; Certain Interpretations. (a)
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) As used in this Agreement, the following terms shall have the
following respective meanings:
"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.
"Holder" means (a) the Investor and (b) any other person to which
the rights of registration under this Agreement have been transferred or
assigned by the Investors or their transferees.
"Initial Public Offering" means the initial public offering of
shares of common stock pursuant to a registration under The Securities Act.
"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 of the Company, related parties and Affiliates.
"Public Float" means the product of (x) the market price (based on
the average closing price for any fifteen trading days within any thirty trading
day period as reported on a national securities exchange) of the publicly traded
equity securities of the IPO Vehicle and (y) the aggregate number of shares of
equity securities of the IPO Vehicle beneficially owned by Persons other than
the Investor and its Affiliates and Affiliates of the Company Group (including
the MCM Parties).
"Registrable Securities" means shares of equity securities of the
IPO Vehicle beneficially owned by SG or any Affiliate, and any shares of equity
securities of the IPO Vehicle issued in respect of such shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger or consolidation or reorganization; provided that any
such shares shall cease to be Registrable Securities when such securities have
been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.
"SEC" means the Securities and Exchange Commission or any successor
commission or agency having similar powers.
13
"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 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.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" or "any" are
not exclusive and "include" and "including" are not limiting; (iii) a reference
to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to
generally accepted accounting principles refers to United States generally
accepted accounting principles; and (vii) a reference in this Agreement to an
Section or Schedule is to the Section or Schedule of this Agreement. All
references to the Company herein shall mean the Company or the IPO Vehicle, as
appropriate.
16. 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 the Investor,
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
14
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
(b) if to the Company,
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 17 or in accordance with the latest unrevised direction
from such party given in accordance with this Section 17.
17. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
18. Benefits of Agreement. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. This Agreement is for the sole
benefit of the parties hereto and not for the benefit of any third party.
19. 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,
15
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.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
21. 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 10.13 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 22. EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY 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.
22. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. The rights and obligations of the Company and KCLLC hereunder shall
be binding on and inure to the benefit of the IPO Vehicle, if the IPO Vehicle is
not the Company or any successor entity. The Investors' rights hereunder are
assignable only to an assignee or transferee of all or a portion of the shares
of Registrable Securities held by the Investors to the extent of such assignment
or transfer, provided, the Investor gives the Company prior written notice
thereof, and, provided further that such right shall not be assigned or
transferred if the share of shares of Registrable Securities are sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent Holder of any Registrable Securities, subject
to the provisions contained herein. In no event shall Investor
16
transfer any rights under this Agreement without a corresponding transfer of all
or a portion of the Registrable Securities.
23. Underwriting Agreement. In connection with each registration
pursuant to Sections 2 or 3 covering an underwritten public offering, the
Company and each selling Holder agree to enter into a written agreement with the
managing underwriter selected in the manner herein provided in such form
containing such provisions as are customary in the securities business for such
an arrangement between such underwriter and companies of the Company's size and
investment stature; provided, however, that no selling Holder shall be required
to make any representations, warranties or covenants relating to the Company and
that the Company shall make such representations, warranties and covenants.
24. Aircraft Carrier Release. The parties agree that if Release No.
33-7606A, or a similar release, is adopted by the SEC, the parties shall make
amendments to this Agreement necessary to preserve the intent of this Agreement.
All references to SEC forms in this Agreement include successor forms thereto.
25. Entire Agreement. This Agreement, the Purchase Agreement and the
Shareholder Agreement contain the entire agreement and understanding between the
parties hereto with respect to matter covered hereby and supersede all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter hereof.
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
KEY COMPONENTS, INC.
By: /s/ Xxxx Xxxxxx
--------------------------------------
Name:
Title:
KEY COMPONENTS, LLC
By: /s/ Xxxx Xxxxxx
--------------------------------------
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:
