Exhibit 10.18
RESTRUCTURING AGREEMENT
DATED AS OF
APRIL 9, 2004
BY AND AMONG
KH LLC, A DELAWARE LIMITED LIABILITY COMPANY,
CELERITY GROUP, INC., A DELAWARE CORPORATION,
KINETICS GROUP, INC., A DELAWARE CORPORATION,
CELERITY GROUP, INC., A CALIFORNIA CORPORATION,
KINETICS CHEMPURE SYSTEMS, INC., AN ARIZONA CORPORATION,
FTS SYSTEMS, INC. (f/k/a KINETICS THERMAL SYSTEMS), A NEW YORK CORPORATION,
KINETIC SYSTEMS, INC., A CALIFORNIA CORPORATION,
KINETIC SYSTEMS CARIBE, INC., A DELAWARE CORPORATION,
KINETIC SYSTEMS INTERNATIONAL, INC., A CALIFORNIA CORPORATION
XXXXXXXXXX CAPITAL PARTNERS, LLC,
ARES CORPORATE OPPORTUNITIES FUND, L.P.,
ARES LEVERAGED INVESTMENT FUND II, L.P.,
ARES III CLO, LTD.,
ARES IV CLO, LTD.,
ARES VII CLO LTD.,
ARES VIII CLO LTD.,
ARES TOTAL VALUE FUND, L.P.,
SPECIAL VALUE ABSOLUTE RETURN FUND, LLC,
SPECIAL VALUE BOND FUND, LLC,
SPECIAL VALUE BOND FUND II, LLC,
X.X. XXXXX FAMILY CHARITABLE LEAD ANNUITY TRUST - 2000,
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
MIDOCEAN CAPITAL INVESTORS, L.P.,
MIDOCEAN CELERITY INVESTMENT PARTNERS, LP,
XXXXXXX CAPITAL III LP,
STRATEGIC ENTREPRENEUR FUND III L.P.,
GRYPHON PARTNERS II, L.P.,
GRYPHON PARTNERS II-A, L.P.,
THIS RESTRUCTURING AGREEMENT (this "Agreement"), dated as of April 9,
2004, is entered into by and among (1) KH LLC, a Delaware limited liability
company ("KH LLC"); (2) Celerity Group, Inc., a Delaware corporation, f/k/a
Kinetics Holdings Corporation ("Holdings"), Kinetics Group, Inc., a Delaware
corporation ("KGI"), Celerity Group, Inc., a California corporation
("Celerity"), Kinetics Chempure Systems, Inc., an Arizona corporation
("Chempure"), FTS Systems, a New York corporation ("KTS") (Holdings, KGI,
Celerity, Chempure, and KTS, collectively, the "Celerity Group"); (3) Kinetic
Systems, Inc., a California corporation ("KSI"), Kinetic Systems Caribe, Inc., a
Delaware corporation ("KSB"), Kinetic Systems International, Inc., a California
corporation ("KSI International" and together with KSI and KSB, collectively,
the "KSI Group"); (4) Xxxxxxxxxx Capital Partners, LLC ("TCP"), Ares Corporate
Opportunities Fund, L.P. ("ACOF"), Ares Leveraged Investment Fund II, L.P.
("Ares II"), Ares III CLO, Ltd. ("Ares III"), Ares IV CLO, Ltd. ("Ares IV"),
Ares VII CLO Ltd., ("Ares VII"), Ares VIII CLO Ltd. ("Ares VIII"), Ares Total
Value Fund, L.P. ("AVTF"), Special Value Absolute Return Fund, LLC ("SVAR"),
Special Value Bond Fund, LLC ("SVBF"), Special Value Bond Fund II, LLC ("SVBF
II"), X.X. Xxxxx Family Charitable Lead Annuity Trust -- 2000 ("X.X. Xxxxx"),
Massachusetts Mutual Life Insurance Company, ("Mass Mutual"), MidOcean Celerity
Investment Partners, L.P. ("MidOcean"), MidOcean Capital Investors, L.P.
("MidOcean Investors"), Xxxxxxx Capital III LP ("Capital III"), Strategic
Entrepreneur Fund III L.P., (together with Capital III, "Xxxxxxx") and Gryphon
Partners II, L.P. ("Gryphon II"), Gryphon Partners II-A, L.P. (together with
Gryphon II, "Gryphon"). Each of the foregoing parties are referred to
individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Parties have determined that a split of the Celerity Group
business and the KSI Group business is in the mutual best interests of the
Parties as well as the potential underwritten initial public offering of common
stock of Holdings (the "Holdings IPO") would be in their mutual best interests
and in the best interests of the other stakeholders of Holdings;
WHEREAS, the Parties have concluded that a series of financing, capital
and corporate restructuring transactions (collectively, the "Restructuring") are
necessary to facilitate the split and the Holdings IPO, all as set forth more
specifically herein and in the term sheet attached to this Agreement as Exhibit
A (the "Term Sheet") ;
WHEREAS, simultaneous with the execution of this Agreement, the
Parties, together with additional stakeholders of the Celerity Group and the KSI
Group, are entering into a number of agreements and completing a series of
transactions constituting a portion of the Restructuring (collectively, the
"Phase I Restructuring"), all as set forth more specifically in Article II of
this Agreement;
WHEREAS, the Parties are proceeding with the Phase I Restructuring in
partial reliance upon their mutual commitment to use their respective best
efforts to complete the balance of the Restructuring (collectively, the "Phase
II Restructuring"), by completing the additional transactions and entering into
the additional related agreements contemplated by Article III of this Agreement;
and
WHEREAS, the Parties desire, as a condition to the completion of the
Phase I Restructuring, to memorialize their respective good faith intentions and
obligations to use their
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respective commercially reasonable efforts to complete the Phase II
Restructuring substantially in accordance with the terms set forth in Article
III by entering into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
AGREEMENT
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following
terms have the meanings specified below.
"Abandonment Agreement" has the meaning set forth in Section
2.3(c)(ii).
"ACOF" has the meaning set forth in the preamble.
"ATVF" has the meaning set forth in the preamble.
"Amended and Restated TCP Purchase Agreement" has the meaning set forth
in Section 2.3(b)(i).
"Amended and Restated Securities Purchase Agreement" means the Amended
and Restated Securities Purchase Agreement dated as of April 2, 2004 by and
among KGI, KHC, KSI, ACOF, SVAR, SVBF, SVBF II, MidOcean Investors, Berhman and
Gryphon that memorializes certain rights and understandings with respect to the
senior subordinated notes due 2006 issued by KGI and warrants issued in
connection therewith.
"Ares Current Holders" means Ares II, Ares VII and Ares VIII.
"Ares Purchasers" means Ares III, Ares IV and Ares ATV.
"Ares II" has the meaning set forth in the preamble.
"Ares III" has the meaning set forth in the preamble.
"Ares IV" has the meaning set forth in the preamble.
"Ares VII" has the meaning set forth in the preamble.
"Ares VIII" has the meaning set forth in the preamble.
"Assignment Agreement" has the meaning set forth in Section 2.3(c)(i).
"Xxxxxxx" has the meaning set forth in the preamble.
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"Xxxxxxx Note" means the Capital Call Note held by Xxxxxxx in the
original principal amount of $4,581,270.74.
"Bridge Contribution Agreement" has the meaning set forth in Section
2.2.
"Bridge Instruments" means those certain 12.5% Junior Subordinated
Notes issued by KGI in favor of the Bridge Instrumentholders, each dated July
17, 2003.
"Bridge Instrumentholders" means each registered holder of the Bridge
Instruments, together with their successors and registered assigns.
"Bridge Instrument Exchange Option Agreement" has the meaning set forth
in Section 2.4(c)(vii).
"Capital III" has the meaning set forth in the preamble.
"Capital Call Exchange Agreement" has the meaning set forth in Section
2.4(c)(iii).
"Capital Call Notes" means those certain 15% Convertible Senior
Subordinated Notes dated June 6, 2003 and issued by Holdings to the Capital Call
Noteholders in the original principal amount of $10,000,000.
"Capital Call Noteholders" means collectively MidOcean Investors and
Xxxxxxx.
"Celerity" has the meaning set forth in the preamble.
"Celerity Group" has the meaning set forth in the preamble.
"Celerity Merger" has the meaning set forth in Section 3.3.
"Chempure" has the meaning set forth in the preamble.
"Contributions and Exchanges" has the meaning set forth in Section
2.4(c).
"Contributing Optionees" has the meaning set forth in Section
2.4(c)(v).
"Credit Agreement" means that certain Amended and Restated Credit
Agreement, dated as of December 10, 2002, by and among Holdings, KGI, as the
"Borrower", the Guarantors party thereto, The Bank of Nova Scotia, as
Administrative Agent, Collateral Agent and Documentation Agent, Bankers Trust
Company, as Syndication Agent, Deutsche Bank Securities, Inc., as Lead Arranger
and Book Manager, Banc One Capital Markets, Inc., as Co-Arranger and various
Lenders party thereto, as may be amended, supplemented, amended and restated or
otherwise modified from time to time.
"First Seller Note" means that certain First 11% Junior Subordinated
Note dated August 30, 2000 in the original principal amount of $25,000,000,
issued by Holdings in favor of United States Filter.
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"Governmental Authority" means the government of the United States or
of any other nation, or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity (including any federal or other association of or
with which any such nation may be a member or associated) exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.
"Gryphon" has the meaning set forth in the preamble.
"Gryphon II" has the meaning set forth in the preamble.
"Holdings" has the meaning set forth in the preamble.
"Holdings IPO" has the meaning set forth in the first recital.
"Holdings Merger" has the meaning set forth in Section 2.4(b).
"X.X. Xxxxx" has the meaning set forth in the preamble.
"KGI" has the meaning set forth in the preamble.
"KGI Contributions" has the meaning set forth in Section 2.5.
"KH LLC" has the meaning set forth in the preamble.
"KSB" has the meaning set forth in the preamble.
"KSI" has the meaning set forth in the preamble.
"KSI Bridge Instruments" has the meaning set forth in Section 2.2.
"KSI Group" has the meaning set forth in the preamble.
"KSI Mezzanine Purchase Agreement" has the meaning set forth in Section
3.6(a).
"KSI Note" has the meaning set forth in Section 2.5.
"KSI Spin-Off" has the meaning set forth in Section 2.6.
"KSI TCP Purchase Agreement" has the meaning set forth in Section
3.6(b).
"KTS" has the meaning set forth in the preamble.
"March Bridge" means the $5 million bridge financing to Celerity
evidenced by the 30 day subordinated secured note and security agreement, each
dated as of March 8, 2004 between Celerity and certain shareholders of Holdings,
and the guaranty of KSI in favor of lenders under the March Bridge.
"Mass Mutual" has the meaning set forth in the preamble.
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"Merger Sub" has the meaning set forth in Section 2.4(b).
"Merger Agreement" has the meaning set forth in Section 2.4(b).
"Mezzanine1 Loans" means loans in the aggregate principal amount of
$5,000,000 under the Amended and Restated Securities Purchase Agreement that are
transferred from Holdings (as successor by merger with KGI) to KSI as part of
the transactions contemplated by Section 3.6(a).
"Mezzanine Notes" shall mean the notes evidencing the loans made
pursuant to the Amended and Restated Securities Purchase Agreement.
"Mezzanine Purchase Option Agreement" has the meaning set forth in
Section 2.3(c)(iv).
"Mezzanine Purchasers" means those purchasers of the notes issued by
KGI pursuant to the Amended and Restated Securities Purchase Agreement.
"Mezzanine Warrants" shall mean the "Warrants," as defined in the
Original Mezzanine Purchase Agreement.
"MidOcean" has the meaning set forth in the preamble.
"MidOcean Investors" has the meaning set forth in the preamble.
"MidOcean Note" means the Capital Call Note held by MidOcean Investors
in the original principal amount of $5,379,446.92.
"New KSI Revolver" has the meaning set forth in Section 3.6(a)(iii).
"New Second Lien Notes" means those promissory notes issued by Holdings
in favor of the TCP Purchasers pursuant to the Amended and Restated TCP Purchase
Agreement.
"Option Exchange Agreement" has the meaning set forth in Section
2.4(c)(v).
"Original Mezzanine Loan Facility" means the aggregate senior
subordinated loans made to KGI by the Original Mezzanine Purchasers in an
original aggregate principal amount of $70,000,000.
"Original Mezzanine Notes" means the aggregate senior subordinated
notes issued by KGI to the Original Mezzanine Purchasers in an original
aggregate principal amount of $70,000,000.
"Original Mezzanine Purchase Agreement" means that certain Securities
Purchase Agreement, dated as of August 30, 2000, by and among Holdings, KGI, as
"Borrower," and the Original Mezzanine Purchasers, as may be amended,
supplemented, amended and restated or otherwise modified from time to time prior
to the date hereof.
"Original Mezzanine Purchasers" means collectively X. X. Xxxxxxx
Mezzanine Fund, L.P., X. X. Xxxxxxx Market Value Fund, L.P., The Northwestern
Mutual Life Insurance Company, Albion Alliance Mezzanine Fund, L.P., Albion
Alliance Mezzanine Fund II, L.P.,
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GoldenTree High Yield Opportunities I L.P., GoldenTree High Yield Master Fund,
Ltd. and DB Structured Products, Inc., f/k/a Deutsche Banc Sharps Xxxxxx Inc.,
SVAR, SVBF and SVBF II.
"Parties" has the meaning set forth in the preamble.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Phase I Restructuring" has the meaning set forth in the third recital.
"Phase II Restructuring" has the meaning set forth in the fourth
recital.
"Registration Statement" has the meaning set forth in Section 3.1.
"Restructuring" has the meaning set forth in the second recital.
"Restructuring Document" has the meaning set forth in Section 5.1.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Second Lien Notes" means those senior secured notes issued pursuant to
the Amended and Restated TCP Purchase Agreement.
"Second Seller Note" means that certain Second 11% Convertible Junior
Subordinated Note dated August 30, 2000 in the original principal amount of
$25,000,000, issued by Holdings in favor of United States Filter.
"Senior Bank Purchase Option Agreement" has the meaning set forth in
Section 2.3(a)(ii).
"Senior Lenders" means collectively The Bank of Nova Scotia, Bankers
Trust Company, Deutsche Bank Securities, Inc., Banc One Capital Markets, Inc.,
and various Lenders to the Credit Agreement, together with their successors and
registered assigns.
"Senior Loan Facility" means the aggregate loans and facility made by
the Senior Lenders to KGI in an aggregate original principal amount of
$260,000,000.
"Shareholders Agreement" has the meaning set forth in Section 2.4(d).
"Strategic Note" means the Capital Call Note held by Strategic
Entrepreneur Fund III, L.P. in the original principal amount of $39,282.34.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in
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which such Person and/or one or more Subsidiaries of such Person has more than a
50% equity interest at the time.
"SVAR" has the meaning set forth in the preamble.
"SVBF" has the meaning set forth in the preamble.
"SVBF II" has the meaning set forth in the preamble.
"TCP" has the meaning set forth in the preamble.
"TCP/Mezzanine Exchange Agreement" has the meaning set forth in Section
2.4(c)(iv).
"TCP Purchase Agreement" means that certain Purchase Agreement, dated
as of September 26, 2003 by and among Holdings, KGI, as the "Borrower," the
Guarantors party thereto, the TCP Purchasers and Xxxxxxxxxx Capital Partners,
LLC, as collateral agent for the TCP Purchasers, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"TCP Purchasers" means SVAR, SVBF, SVBF II, the Ares Purchasers, X.X.
Xxxxx and Mass Mutual.
"TCP Purchase Option Agreement" has the meaning set forth in Section
2.3(b)(ii).
"TCP Warrants" shall mean the "Xxxxxxxxxx Warrants," as defined in the
TCP Purchase Agreement.
"TCP1 Notes" means the Second Lien Notes in the aggregate principal
amount of $50,000,000 that will be transferred from KGI to KSI as part of the
transactions contemplated by Section 3.6(b).
"Term Sheet" has the meaning set forth in the second recital.
"Transaction Documents" means, collectively, this Agreement (including
all exhibits and schedules hereto) and all other agreements exhibited to this
Agreement or contemplated herein to be entered into in respect of the
Restructuring.
"Transactions" means the execution, delivery and performance by each
Party of, and all other transactions contemplated by, the Transaction Documents.
"United States Filter" means United States Filter Corporation, a
Delaware corporation.
"United States Filter Exchange Agreement" has the meaning set forth in
Section 2.4(c)(ii).
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ARTICLE II
PHASE I RESTRUCTURING
SECTION 2.1 PLAN AND INTENTION.
(a) Simultaneous with the execution of this Agreement the
Parties are executing and delivering each of the agreements identified in this
Article II and effecting the transactions contemplated by such agreements. Each
of the agreements required to be delivered and each of the transactions
contemplated by such agreements and this Article II are being entered into
and/or performed on the understanding that all of such agreements will be
executed and delivered and all such transactions performed as required herein
and therein, and the failure of any one step shall relieve the Parties of their
obligations to deliver the agreements identified in this Article II or to
proceed with any of the transactions contemplated by such agreements or this
Article II. Each Party is entering into each such agreement on the understanding
and expectation that the Parties shall in good faith negotiate with the other
Parties in an effort to reach agreement on a version of each of the agreements
identified in Article III that will be acceptable to each party to each such
agreement and shall use commercially reasonable efforts to execute and deliver
such agreements expeditiously upon such agreement and to cause the transactions
contemplated by such executed agreements to occur as promptly as practicable (it
being understood among the Parties that "best effort" and commercially
reasonable efforts" for purposes of this Agreement shall not require any Party
to agree to any agreement or provision: (1) that is not reasonable and customary
with respect to such a party in a similar circumstance (except to the extent
that such agreement or provision is set forth in this Agreement or the Term
Sheet), (2) that conflicts with or in inconsistent with this Agreement
(including the Term Sheet) or (3) that requires such Party to contribute or lend
additional funds to the Celerity Group or the KSI Group other than pursuant to a
definitive document expressly contemplated under this Agreement and acceptable
to such Party). References in the Phase I Restructuring to definitive agreements
shall refer to the forms of such agreements substantially in the form of those
documents marked "final" with the consent of the parties thereto as of the date
hereof.
(b) To the extent that there is any conflict between this
Agreement and any definitive agreement referenced herein and executed by the
parties thereto, the terms of such executed, definitive agreement shall prevail.
SECTION 2.2 CONTRIBUTION OF BRIDGE INSTRUMENTS. Simultaneous with the
execution of this Agreement, the Bridge Instrumentholders have executed and
delivered an agreement (the "Bridge Contribution Agreement") pursuant to which
the Bridge Instrumentholders shall contribute the Bridge Instruments to KSI in
exchange for issuance by KSI to the Bridge Instrumentholders of Junior
Subordinated Instruments, in form and substance similar to Exhibit A to the
Bridge Contribution Agreement (collectively, the "KSI Bridge Instruments"). The
Bridge Instrumentholders, KSI and KGI also shall have executed and delivered a
side letter which provides each Bridge Instrumentholder with the right to
rescind its contribution of the Bridge Instruments to KSI in the event that the
Holdings IPO does not occur on or before June 30, 2004; provided that if the
Bridge Instrumentholders exercise their rescission right, then no later than two
days prior to the consummation of a Holdings IPO that occurs after June 30,
2004,
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the Bridge Instrumentholders shall recontribute the Bridge Instruments to KSI if
the Phase II Restructuring is consummated on or prior to the consummation of the
Holdings IPO.
SECTION 2.3 FINANCING TRANSACTIONS.
(a) SENIOR LOAN FACILITY. Contemporaneous with the execution
of this Agreement, the Celerity Group and the KSI Group shall effect a
restructuring of the Senior Loan Facility as follows:
(i) Amendment No. 7 to the Credit Agreement shall be
executed by all parties thereto and be delivered to Holdings and KGI.
(ii) KSI and the other parties thereto shall have
executed a purchase option agreement in favor of the Senior Lenders (the "Senior
Bank Purchase Option Agreement"). The purposes of the Senior Bank Purchase
Option Agreement will be, among other things, to establish the financial
covenants applicable to the KSI Group on a stand-alone basis following the KSI
Spin-Off and to grant an option in favor of the Senior Lenders that provides for
the Senior Lenders to require KSI to purchase KGI's obligations outstanding
under the Senior Loan Facility in the event of an Event of Default (as defined
in the Senior Bank Purchase Option Agreement).
(b) TCP AGREEMENTS. Contemporaneous with the execution of this
Agreement, the TCP Purchasers, the Celerity Group and the KSI Group shall effect
a restructuring of the TCP Purchase Agreement and Second Lien Notes as follows:
(i) The TCP Purchasers and the other parties thereto
shall have executed and delivered an amended and restated TCP Purchase Agreement
(the "Amended and Restated TCP Purchase Agreement"), which shall reflect the
terms set forth in the Term Sheet opposite the caption "New 2nd Lien Notes."
Pursuant to the Amended and Restated TCP Purchase Agreement the following
transactions will occur:
(1) the TCP Purchasers (other than the Ares
Purchasers) will purchase from KGI (x) $29,000,000 aggregate principal
amount of New Second Lien Notes (with the same priority and ranking as
the existing Second Lien Notes) and (y) a strip of warrants to purchase
3.03% of the fully diluted equity of Holdings. in exchange for
$16,669,027.00 and (ii) the $10,000,000 of existing Mezzanine Notes
purchased pursuant to Section 2.3(c) below;
(2) SVAR, SVBF and SVBF II will purchase
from KGI a liquidation certificate with a payment amount of $833,333.33
in exchange for $125,000.00 in cash,
(3) SVAR, SVBF and SVBF II will pay
$74,676.64 for a strip of warrants equal to the amount sufficient to
gross up SVAR, SVBF and SVBF II to 5/60 of 6% of the fully diluted
equity of Holdings (to be calculated excluding the TCP Retained
Warrants (as defined in the TCP Purchase Agreement),
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(4) the Ares Purchasers will purchase from
KGI (x) $5 million aggregate principal amount of New Second Lien Notes
(with the same priority and ranking as the existing Second Lien Notes)
and (y) a strip of warrants to purchase 0.5% of the fully diluted
equity of Holdings in exchange for $5,000,000 in cash; and
(5) the TCP Purchasers will receive
anti-dilution protection for the warrants that they acquired in
connection with their purchase of existing Second Lien Notes as set
forth in the Term Sheet.
(ii) KSI and the other parties thereto shall have
executed a purchase option agreement in favor of the TCP Purchasers (the "TCP
Purchase Option Agreement"). The purposes of the TCP Purchase Option Agreement
will be, among other things, to establish the financial covenants applicable to
the KSI Group on a stand-alone basis following the KSI Spin-Off and to grant to
the TCP Purchasers the option to require KSI to purchase KGI's obligations
outstanding under the TCP Purchase Agreement and Second Lien Notes in the event
of an Event of Default (as defined in the TCP Purchase Option Agreement).
(c) MEZZANINE FINANCING. Contemporaneous with the execution of
this Agreement, the Celerity Group and the Mezzanine Purchasers shall effect a
restructuring of the Original Mezzanine Loan Facility as follows:
(i) (x) The Mezzanine Purchasers (other than SVAR,
SVBF and SVBF II) and KGI shall execute and deliver, against execution and
delivery by the Original Mezzanine Purchasers (other than SVAR, SVBF and SVBF
II), the Assignment and Assumption Agreement (the "Assignment Agreement")
pursuant to which, as described in the Term Sheet, such Mezzanine Purchasers
will purchase from such Original Mezzanine Purchasers (1) $55,000,000 face
amount of the Original Mezzanine Notes and (2) all the warrants associated with
the Original Mezzanine Notes held by such Original Mezzanine Purchasers other
than the Retained Warrants (as defined in the Assignment Agreement), for an
aggregate purchase price equal to $52,868,703.64 and (y) the TCP Purchasers
(other than the Ares Purchasers) and KGI shall execute and deliver the TCP
Assignment and Assumption Agreement pursuant to which such TCP Purchasers will
purchase from such Original Mezzanine Purchasers $10,000,000 face amount of the
Original Mezzanine Notes for an aggregate purchase price equal to
$12,131,296.36.
(ii) The Original Mezzanine Purchasers shall enter
into an abandonment agreement (the "Abandonment Agreement") as a result of which
such Original Mezzanine Purchasers shall surrender and forfeit the $10,000,000
liquidation preference certificate that they previously received.
(iii) Subject to the receipt by the Celerity Group
and KSI of all requisite board, stockholder and creditor approvals and consents
necessary to effect the Holdings Merger and the KSI Spin-Off, the Mezzanine
Purchasers, Holdings and KGI (as "Borrower") shall execute and deliver the
Amended and Restated Securities Purchase Agreement. As contemplated by the
Amended and Restated Securities Purchase Agreement, (1) the Mezzanine Purchasers
(other than SVAR, SVBF and SVBF II) will pay Holdings $2,131,296.36 for the new
warrants they are to receive from Holdings and the new liquidation certificate
representing
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the right to receive 55/60 of $10 million (or $9,166,667) and (2) KGI will issue
amended and restated Mezzanine Notes.
(iv) KSI shall execute a purchase option agreement in
favor of the Mezzanine Purchasers (the "Mezzanine Purchase Option Agreement").
The purposes of the Mezzanine Purchase Option Agreement will be, among other
things, to establish the financial covenants applicable to the KSI Group on a
stand-alone basis following the KSI Spin-Off and to grant an option in favor of
the Mezzanine Purchasers that provides for Mezzanine Purchasers to require KSI
to purchase KGI's obligations outstanding under the Original Mezzanine Loan
Facility in the event of an Event of Default (as defined in the Mezzanine
Purchase Option Agreement).
(d) GUARANTEES. Concurrently with the effective time of the
Holdings Merger, and with KH LLC having received a written opinion of a
nationally recognized valuation firm affirming the solvency of KGI (taking into
consideration and having given effect to the consummation of the transactions
contemplated by Article II other than this Section 2.3(d)), which opinion is a
requirement to the consummation of the financing transactions described in this
Section 2.3, KH LLC shall execute and deliver the following guarantees and
pledge agreements, each of which shall remain in full force and effect until
replaced by the guarantees and pledge agreements set forth in Section 3.9 of
this Agreement:
(i) KH LLC shall execute a non-recourse guaranty in
favor of the Senior Lenders pursuant to which KH LLC shall guaranty amounts owed
by KGI under the Senior Loan Facility, which shall be secured by a first
priority lien on the capital stock of Holdings and KSI owned by KH LLC;
(ii) KH LLC shall execute a non-recourse guaranty and
related pledge agreement in favor of the TCP Purchasers pursuant to which KH LLC
shall guaranty amounts owed by KGI under the Amended and Restated TCP Purchase
Agreement, which shall be secured by a second priority lien on the capital stock
of Holdings and KSI owned by KH LLC; and
(iii) KH LLC shall execute a non-recourse guaranty in
favor of the Mezzanine Purchasers pursuant to which KH LLC shall guaranty
amounts owed by KGI under the Amended and Restated Securities Purchase Agreement
(which guaranty shall be limited to amounts received with respect to capital
stock of Holdings and KSI owned by KH LLC), subject to the prior perfected liens
on such shares.
(e) REPAYMENT OF MARCH BRIDGE. Contemporaneous with the
execution of this Agreement, Holdings shall cause Celerity to repay in full the
March Bridge.
(f) KHC-KSI FACILITY. KGI and KSI shall enter into a loan
facility that will allow KGI to make payments to KSI for working capital
purposes to the extent permitted under the Credit Agreement, TCP Purchase
Agreement and Amended and Restated Securities Purchase Agreement.
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SECTION 2.4 MERGER TRANSACTIONS. KH LLC, the Celerity Group and the
other Parties shall take the following actions, immediately following
consummation of the transactions contemplated by Section 2.3 (other than Section
2.3(d)) of this Agreement:
(a) INFORMATION STATEMENT. Holdings has distributed to all
holders of shares of its capital stock, as well as all holders of options,
warrants and other securities convertible or exchangeable for or into shares of
such capital stock, a Consent Solicitation and Information Statement.
(b) HOLDINGS MERGER. Knight Acquisition Corp., a Delaware
corporation ("Merger Sub"), shall merge with and into Holdings, with Holdings as
the surviving company (the "Holdings Merger"), pursuant to the terms of that
certain Agreement and Plan of Merger dated as of April 2, 2004, by and among KH
LLC, Merger Sub, and Holdings (the "Merger Agreement"). The Merger Agreement
shall have been adopted by holders of (1) two-thirds of the outstanding shares
of Series A Preferred Stock and Series A-1 Preferred Stock of Holdings, voting
together as a single series; (2) two-thirds of the outstanding shares of Series
B Preferred Stock and Series B-1 Preferred Stock of Holdings, voting together as
a single series; and (3) a majority of the outstanding shares of Holdings
capital stock, voting together as a single class (on an as-converted to common
stock basis). Persons holding at least 95% of the holders of capital stock of
Holdings shall have executed and delivered, or unconditionally agreed to execute
and deliver, the LLC Agreement and the Unitholders Agreement.
(c) CONTRIBUTION AND EXCHANGE OF INTERESTS IN KH LLC.
Concurrently with the effective time of the Holdings Merger the following shall
occur (collectively, "Contributions and Exchanges"):
(i) By virtue of the Holdings Merger and without any
further action on the part of the Celerity Group or its stockholders, the
outstanding shares of Holdings capital stock shall be canceled and converted
into units of KH LLC as set forth in the Merger Agreement, and each record
holder of Holdings capital stock (except for any dissenting shares and shares of
Holdings capital stock cancelled pursuant to the terms of the Merger Agreement)
shall be admitted as a member of KH LLC on the terms set forth in the Amended
and Restated LLC Agreement;
(ii) Pursuant to that certain letter agreement dated
as of April 2, 2004 entered into by and among KH LLC and United States Filter
(the "United States Filter Exchange Agreement"), the First Seller Note shall be
contributed by United States Filter to KH LLC in exchange for 1 Class C-1 Unit
of KH LLC; the Second Seller Note shall be contributed by United States Filter
to KH LLC in exchange for 8,333,333 Class C Units of KH LLC; and the two
warrants held by United States Filter, each dated August 30, 2000 to purchase up
to an aggregate of 7,150,094 shares of common stock of Holdings at $3 per share,
subject to adjustment from time to time, shall be contributed by United States
Filter to KH LLC in exchange for 7,150,094 Common B Units of KH LLC;
(iii) Pursuant to that certain letter agreement dated
as of April 2, 2004 entered into by and among KH LLC and the Capital Call
Noteholders (the "Capital Call Exchange Agreement") the following shall occur:
(i) the MidOcean Note shall be contributed by
13
MidOcean Investors to KH LLC in exchange for 1,494,291 Class D Units of KH LLC,
and the warrant dated December 10, 2002 to purchase 125,520 shares of common
stock of Holdings shall be contributed by MidOcean Investors to KH LLC in
exchange for 125,520 Common Units of KH LLC; (ii) the Xxxxxxx Note shall be
contributed by Xxxxxxx to KH LLC in exchange for 1,272,575 Class D Units of KH
LLC, and the warrant dated December 10, 2002 to purchase 106,902 shares of
common stock of Holdings shall be contributed by Xxxxxxx to KH LLC in exchange
for 106,902 Common Units of KH LLC; and (iii) the Strategic Note shall be
contributed by Strategic to KH LLC in exchange for 10,912 Class D Units of KH
LLC, and the warrant dated December 10, 2002 to purchase 911 shares of common
stock of Holdings shall be contributed by Strategic to KH LLC in exchange for
911 Common Units of KH LLC;
(iv) Pursuant to that certain letter agreement dated
as of April 2, 2004 entered into by and among KH LLC, the TCP Purchasers and the
Mezzanine Purchasers (the "TCP/Mezzanine Exchange Agreement"), each of the TCP
Purchasers and Mezzanine Purchasers shall contribute to KH LLC the TCP Warrants
and the Mezzanine Warrants, as applicable, in exchange for the Units of KH LLC
listed in the TCP/Mezzanine Exchange Agreement;
(v) Pursuant to that certain letter agreement dated
as of April 2, 2004 entered into by and among KH LLC and certain holders
("Contributing Optionees") of options to purchase Holdings common stock (the
"Option Exchange Agreement") the Contributing Optionees shall contribute to KH
LLC certain options in exchange for the Profit Units of KH LLC listed on Exhibit
B to the Option Exchange Agreement;
(vi) Pursuant to the Assignment Agreement, the
Original Mezzanine Purchasers (other than SVAR, SVBF and SVBF II) shall
contribute the Retained Warrants to KH LLC in exchange for the agreed Units of
KH LLC.
(vii) Each Bridge Instrumentholder shall be a party
to that certain letter agreement dated April 2, 2004 entered into by and among
KH LLC and the Bridge Instrumentholders (the "Bridge Instrument Exchange Option
Agreement") that will provide each holder of the KSI Bridge Instruments shall
have the option to contribute the KSI Bridge Instruments to KH LLC in exchange
for the Class E Units of KH LLC, as listed on Exhibit B to the Bridge Instrument
Exchange Option Agreement.
(viii) Following the contributions to KH LLC pursuant
to the Contributions and Exchanges, KH LLC shall contribute the First Seller
Note, Second Seller Note and Capital Call Notes to Holdings in exchange for
shares of Series C-1 preferred stock, Series C preferred stock and Series D
preferred stock, respectively, of Holdings with an aggregate liquidation value
equal to the aggregate principal amount of each such note contributed to KH LLC.
(d) UNITHOLDERS' AGREEMENT. Concurrently with the effective
time of the Holdings Merger, the members of KH LLC shall enter into a
Unitholders Agreement with KH LLC, Holdings and KSI which shall govern certain
restrictions on transfer, registration rights, governance and certain other
matters. Upon execution of the Unitholders Agreement by the parties thereto, KH
LLC shall cause the termination of the Fourth Amended and Restated Shareholders
Agreement ("Shareholders Agreement").
14
(e) HOLDINGS CERTIFICATE. Effective upon the Holdings Merger,
the Restated Certificate of Incorporation of Holdings amending and restating the
Certificate of Incorporation of Holdings shall be filed with and become
effective in the State of Delaware.
SECTION 2.5 KGI CONTRIBUTIONS. For good and valid consideration, prior
to and as a condition precedent of the KSI Spin-Off, KGI shall (1) contribute to
KSI: (a) that certain intercompany Promissory Note dated December 31, 2001
issued by KSI in favor of KGI in the aggregate principal amount of $150,000,000,
and (b) the net accounts receivable owing to KGI from KSI less KGI's good faith
estimate of the fair market value of the Bridge Instruments at the time the
Bridge Instruments are redeemed (collectively, the "KGI Contributions"), in each
case pursuant to that certain Contribution Agreement dated as of April 2, 2004,
between KGI and KSI, and (2) issue a promissory note in favor of KSI in the
original principal amount of $13,000,000 (the "KSI Note").
SECTION 2.6 KSI SPIN-OFF. Immediately after the KGI Contributions and
KGI's issuance of the KSI Note, KGI shall make a distribution to Holdings of the
100% equity interest in KSI owned by KGI. Promptly thereafter, Holdings shall
make a distribution to KH LLC of the 100% equity interest in KSI owned by
Holdings, resulting in KSI becoming a wholly-owned direct Subsidiary of KH LLC
(the "KSI Spin-Off").
SECTION 2.7 PRE-EMPTIVE RIGHTS NOTICE. In connection with certain of
the transactions in the Phase I Restructuring, the stockholders of Holdings have
pre-emptive rights set forth in Section 2.7 of the Shareholders Agreement to
purchase their pro rata share of the Mezzanine Notes being transferred by the
Original Mezzanine Purchasers together with the Mezzanine Warrants and the
liquidation certificate issued in connection therewith. Promptly following
consummation of the Phase I Restructuring, Holdings shall comply with Section
2.7 of the Shareholders Agreement, and MidOcean, Xxxxxxx and Gryphon agree that
in the event any stockholder exercises its pre-emptive rights, then they shall
agree to proportionate sell-downs among themselves of the Mezzanine Notes and
associated warrants and liquidation certificate.
ARTICLE III
PHASE II RESTRUCTURING
SECTION 3.1 PLAN AND INTENTION. The Parties agree to use commercially
reasonable efforts to take the actions set out in this Article III as promptly
as practicable, but in no event later than the date on which the registration
statement for the Holding IPO (the "Registration Statement") is to be declared
effective by the SEC, each in accordance with the forms of agreement attached
hereto or, if no such form is attached, substantially in accordance with the
relevant terms of the Term Sheet, as specified below. The Parties shall in good
faith cooperate to complete the negotiation and preparation of the agreements
and transactions identified in Article III (it being understood among the
Parties that no fees or other charges shall be incurred by the Celerity Group or
KSI Group with respect to the Phase II Restructuring other than actual expenses
or as set forth in the Term Sheet).
SECTION 3.2 FILING OF REGISTRATION STATEMENT. Holdings shall use its
reasonable best efforts to prepare and file the Registration Statement on Form
S-1 with the SEC with respect to
15
the Holdings IPO as soon as reasonably practicable following completion of the
transactions described in the Phase I Restructuring and completion by Ernst &
Young of the audited financial statements required by Regulation S-K to be
included in the Registration Statement. Holdings and each other member of the
Celerity Group shall use their respective best efforts to respond as promptly as
reasonably practicable to comments raised by the SEC to the Registration
Statement, and to file such amendments as are necessary to cause the
Registration Statement to be declared effective by the SEC. It is the intention
of the Parties that Holdings will seek to have the Registration Statement
declared effective no later than June 30, 2004, it being understood by the
Parties that the consummation and timing of the Holdings IPO is subject to
conditions outside the control of the Parties.
SECTION 3.3 CELERITY MERGER. Assuming that all conditions as may be set
forth in the underwriting agreement in respect to the Holdings IPO have been
satisfied (other than the condition set forth in this Section 3.3), then
immediately prior to closing of the Holdings IPO, Celerity shall merge with and
into KGI, with KGI as the surviving entity (it being understood that at any time
following the execution of this Agreement but prior to the closing of the
Holding IPO Chempure shall merge with and into Celerity, with Celerity as the
surviving entity). Immediately thereafter, KGI shall merge with and into
Holdings, with Holdings as the surviving entity. (The merger transactions
referred to in the foregoing two sentences shall be referred to hereinafter as
the "Celerity Merger.") Upon consummation of the Celerity Merger, all remaining
debt obligations of KGI shall be assigned to and assumed by Holdings by
operation of law and Holdings shall become the "Borrower" of such obligations.
SECTION 3.4 USE OF PROCEEDS. Holdings shall apply the proceeds from the
Holdings IPO to pay in full amounts outstanding under the Senior Loan Facility,
to reduce the outstanding amount of other indebtedness of the Celerity Group, to
repay the KSI Note and to provide capital to the Celerity Group, as described in
the Term Sheet under the caption "Uses of IPO Proceeds."
SECTION 3.5 SUPPORT AGREEMENT. Following effectiveness of the
Registration Statement but prior to entering into the agreements described in
Section 3.6, KH LLC shall enter into the KSI Support Agreement on the terms
described in the Term Sheet opposite the caption "Support Agreement."
SECTION 3.6 RESTRUCTURING OF INDEBTEDNESS. Contemporaneous with the
closing of the Holdings IPO and use of the proceeds therefrom in accordance with
Section 3.4, the TCP Purchasers, the Mezzanine Purchasers, KSI and KGI will
enter into the following agreements, pursuant to which KSI will assume certain
indebtedness of Holdings in consideration for the receipt of certain common
stock of Holdings, and Holdings will be released from any obligations in respect
of such assumed indebtedness:
(a) KSI MEZZANINE PURCHASE AGREEMENT. KSI shall execute a
Purchase Agreement in favor of the Mezzanine Purchasers (the "KSI Mezzanine
Purchase Agreement") that provides for the rights, terms and conditions set
forth in the Term Sheet opposite the caption "Post-IPO KSI" including the
following:
16
(i) assumption by KSI of Holdings' obligations to pay
the Mezzanine Purchasers the Mezzanine1 Loans amounts and amounts payable under
the liquidation certificates;
(ii) issuance by KSI of (a) new promissory notes in
favor of the Mezzanine Purchasers to evidence the assumed Mezzanine1 Loans and
(b) new liquidation certificates to evidence the assumed liquidation
certificates;
(iii) Mezzanine Purchasers' consent to (a)
establishment of a revolving credit facility by KSI in an amount not to exceed
the amount specified in the Term Sheet (the "New KSI Revolver"), which shall be
on terms that are reasonably acceptable to the Mezzanine Purchasers, and (b) if
net proceeds of the Holdings IPO were equal to or greater than $193,000,000,
application of $13,000,000 of such net proceeds to be applied by KGI toward
repayment of the KSI Note; and
(iv) new independent set of financial covenants,
including (1) minimum EBITDA; (2) total leverage; (3) fixed charge coverage; and
(4) minimum worldwide cash plus unused revolver subject to a borrowing base of
no less than $15 million.
The amounts set forth in this Section 3.6(a) assume the Holdings IPO will yield
$203,000,000 of net proceeds, and if the net proceeds are more or less than this
amount, then the amounts above are subject to change as set forth in the Term
Sheet.
(b) KSI GROUP'S TCP PURCHASE AGREEMENT. KSI shall execute a
new Purchase Agreement (the "KSI TCP Purchase Agreement") in favor of the TCP
Purchasers that shall provide for the rights, terms and conditions set forth in
the Term Sheet opposite the caption "Post-IPO KSI" including the following:
(i) assumption by KSI of Holdings' obligations to pay
the $50,000,000 TCP1 Notes, secured by a continuing security interests in all
assets of KSI;
(ii) issuance of new promissory notes by KSI in favor
of the TCP Purchasers in an aggregate original principal amount of $50,000,000,
to evidence the notes issued on exchange of the TCP1 Notes;
(iii) the TCP Purchasers' consent to (a)
establishment of the New KSI Revolver, which shall be on terms that are
reasonably acceptable to the TCP Purchasers, and (b) if net proceeds of the
Holdings IPO were equal to or greater than $193,000,000, application of
$13,000,000 of such net proceeds to be applied by KGI toward repayment of the
KSI Note; and
(iv) new independent set of financial covenants,
including (1) minimum EBITDA; (2) total leverage; (3) senior leverage; (4) fixed
charge coverage; and (5) minimum worldwide cash plus unused revolver subject to
a borrowing base of no less than $15 million.
The amounts set forth in this Section 3.6(b) assume the Holdings IPO will yield
$203,000,000 of net proceeds, and if the net proceeds are more or less than this
amount, then the amounts above are subject to change as set forth in the Term
Sheet.
17
(c) MODIFICATION OF KGI INDEBTEDNESS. Celerity, KGI, the
Mezzanine Purchasers and the TCP Purchasers shall cooperate in good faith to
amend the Amended and Restated TCP Purchase Agreement and Amended and Restated
Securities Purchase Agreement on terms reasonably acceptable to them to provide
for the rights, terms and conditions consistent with those set forth in the Term
Sheet opposite the caption "Post-IPO" for Holdings.
(d) ISSUANCE OF HOLDINGS' COMMON STOCK. Contemporaneous with
the consummation of the Holdings IPO, Holdings shall issue to KSI Holdings
common stock with a fair market value (based on the price per share set forth in
the prospectus) equal to $65,000,000 in consideration for KSI's assumption of
$65,000,000 of certain liabilities of the Celerity Group, including the TCP1
Notes and the Mezzanine1 Notes. The Celerity Group and the KSI Group shall
structure the issuance of stock and assumption of liabilities as a taxable
purchase of Holdings' common stock by KSI in exchange for KSI's assumption of
$65,000,000 of certain liabilities of the Celerity Group, including the TCP1
Notes and Mezzanine1 Notes. The amounts set forth in this Section 3.6(d) assume
the Holdings IPO will yield $203,000,000 of net proceeds, and if the net
proceeds are more or less than this amount, then the amounts above are subject
to change as set forth in the Term Sheet.
(e) REDEMPTION OF THE BRIDGE INSTRUMENTS. One day prior to the
consummation of the Holdings IPO, KGI shall redeem from KSI and cancel all of
the Bridge Instruments held by KSI in exchange for an amount of the net
intercompany payables owing from KSI to KGI equal in fair value to the Bridge
Instruments redeemed and canceled. The Celerity Group and the KSI Group intend
to structure the redemption of the Bridge Instruments as a redemption of stock
by KGI for its fair value within the meaning of Section 317(b) of the Internal
Revenue Code of 1986, as amended.
SECTION 3.7 NEW REVOLVING FACILITIES. Simultaneous with the
consummation of the Holdings IPO, KSI shall establish the New KSI Revolver and
Holdings will establish a revolving credit facility in an amount not to exceed
the amount specified in the Term Sheet (the "New Holdings Revolver"). KSI and
Holdings shall use commercially reasonable efforts to cause each of the New KSI
Revolver and the New Holdings Revolver, respectively, to have the borrowing
capacity specified therefor in the Term Sheet. (The consents required to
implement these facilities are provided in Section 3.6(a)(iii) and Section
3.6(b)(iii) above.)
SECTION 3.8 CANCELLATION OF THE PURCHASE OPTION AGREEMENTS. Upon
consummation of the Holdings IPO and the agreements described in Section 3.6 and
repayment of the Senior Loan Facility as contemplated in Section 3.4, the Senior
Bank Purchase Option Agreement, the TCP Purchase Option Agreement and the
Mezzanine Purchase Option Agreement shall become void and of no further force
and effect.
SECTION 3.9 GUARANTEES BY KH LLC. Upon receipt by KH LLC of a written
opinion of a nationally recognized valuation firm affirming the solvency of
Holdings and KSI (taking into consideration and having given effect to, the
consummation of the transactions contemplated by this Article III, other than
this Section 3.9), each of the Guarantees described in Section 2.3(d) shall be
cancelled and contemporaneous therewith KH LLC shall execute and deliver the
following, to be effective concurrently with execution and delivery of the
agreements contemplated by Section 3.6(a) and Section 3.6(b):
18
(a) KH LLC shall execute a non-recourse guaranty in favor of
the lenders under the KSI TCP Purchase Agreement and KSI Mezzanine Purchase
Agreement in respect of amounts owed by KSI to such parties. KH LLC shall pledge
a first priority lien on the shares of Holdings owned by KH LLC in favor of the
TCP Purchasers and a second priority lien on such Holdings shares in favor of
the purchasers under the KSI Mezzanine Purchase Agreement, such common stock to
be subject to standard underwriters' lockup provisions. Such guaranty and pledge
will be on terms consistent with those set forth in the Term Sheet.
(b) KH LLC shall execute a non-recourse guaranty in favor of
the lenders under the New KSI Revolver, the lenders under the KSI TCP Purchase
Agreement and the lenders under the KSI Mezzanine Purchase Agreement. KH LLC
shall pledge a first priority lien on the shares of KSI owned by KH LLC in favor
of the lenders under the New KSI Revolver, a second priority lien on such KSI
shares in favor of the purchasers under the KSI TCP Purchase Agreement and a
third priority lien on such shares in favor of the purchasers under the KSI
Mezzanine Purchaser Agreement. Such guaranty and pledge will be on terms
consistent with those set forth in the Term Sheet.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Party, as to itself, represents and warrants, as of the date
hereof to each other Party as follows:
SECTION 4.1 ORGANIZATION; POWERS. Such Party is duly organized, validly
existing and, where applicable, in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and is qualified to do business in, and, where
applicable, is in good standing in, every jurisdiction where such qualification
is required.
SECTION 4.2 AUTHORIZATION; ENFORCEABILITY. The Transactions to be
performed by such Party are within such Party's corporate powers and have been
duly authorized by all necessary corporate and shareholder action. This
Agreement has been duly executed and delivered by such Party and constitutes a
legal, valid and binding obligation of such Party, enforceable against such
Party in accordance with its terms, except as such enforceability may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 4.3 GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions to
be performed by such Party (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except for (i) such as have been obtained or made and are in full force and
effect, and (ii) those that the failure to have or obtain will not have a
material adverse effect on the business condition, assets, operations or
financial performance of such Party, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of such
Party or any order of any Governmental
19
Authority having jurisdiction, and (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon such Party or
its assets. The Parties will endeavor to obtain all third-party consents
required for any of the Transactions.
SECTION 4.4 COMPLIANCE WITH LAWS AND AGREEMENTS. Such Party is in
compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, agreements and other
instruments binding upon it or its property, except where the failure to do so,
individually or in the aggregate, would not have a material adverse effect in
respect on the business condition, assets, operations or financial performance
of such Party.
ARTICLE V
COVENANTS
As an inducement to each of the Parties to enter into this Agreement,
each of the Parties covenants to all of the other Parties as follows:
SECTION 5.1 EXECUTED COUNTERPARTS. Each Party will deliver to the
others a counterpart of this Agreement and each other agreement contemplated by
the Phase I Restructuring, and agrees that upon reaching a definitive agreement
negotiated pursuant to Section 2.1 of this Agreement to deliver to the others a
counterpart of each such definitive agreement contemplated by the Phase II
Restructuring (each such agreement, a "Restructuring Document"), to which such
other Party is intended to be a party signed on behalf of such other Party or
satisfactory written evidence (which may include a fax transmission of signed
signature pages) that such other Party has signed a counterpart of this
Agreement and each other Transaction Document, in any case notarized as
necessary.
SECTION 5.2 ORGANIZATIONAL DOCUMENTS. The Parties will use their
respective best efforts to obtain such documents and certificates as may be
reasonably requested relating to satisfactory evidence of all governmental
filings and approvals required to effect the Restructuring.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 FURTHER ASSURANCES. Each Party hereby agrees that to the
extent that this Agreement (including the Term Sheet) contemplate an agreement
that cannot be consummated pursuant to one or more of the definitive agreements
referenced herein, then the Parties shall in good faith negotiate with the other
Parties in an effort to reach agreement on and enter into such other agreements
(each, a "Substitute Agreement") that may be required to effectuate the terms of
this Agreement (including the Term Sheet); provided, however, that no Party
shall be obligated to enter into a Substitute Agreement that contains any terms
or provisions that are less favorable to such Party in any material respect than
the agreement that such Substitute Agreement is intended to replace or that is
otherwise inconsistent with the terms of this Agreement and the Term Sheet.
20
SECTION 6.2 EXPENSES; NO INDEMNIFICATION. Except as may be expressly
agreed in the other Transaction Documents, Celerity Group shall be responsible
for any and all out-of-pocket expenses, fees, charges, disbursements of any
counsel and any other costs it, any of its agents or any other Party incurs in
connection with the negotiation, execution and delivery of this Agreement and
the other Transaction Documents.
SECTION 6.3 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed
in counterparts (and by different Parties on different counterparts), each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Agreement shall become effective when it
shall have been executed by all Parties listed on the signature pages hereto,
and thereafter shall be binding upon and inure to the benefit of the Parties and
their respective successors and assigns. Delivery of an executed counterpart of
a signature page to this Agreement by fax shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 6.4 HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 6.5 AMENDMENT. None of the terms or provisions of this
Agreement may be amended, supplemented or otherwise modified without the consent
of each of the Parties.
SECTION 6.6 FULL AND COMPLETE AGREEMENT. Subject to Section 2.1, this
Agreement together with the Exhibits attached hereto and the other Transaction
Documents represent the complete understanding between the parties, supersedes
any and all agreements and understandings, whether oral or written and may not
be modified, altered, changed, or waived, in whole or in part, except upon
written consent of the parties.
[END OF PAGE]
[SIGNATURE PAGES FOLLOW]
21
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
KH LLC,
a Delaware limited liability company
By: /s/ Xxxx Xxxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
CELERITY GROUP, INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
KINETICS GROUP, INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
CELERITY GROUP, INC.,
a California corporation
By: /s/ Xxxx Xxxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
KINETICS CHEMPURE SYSTEMS, INC.,
an Arizona corporation
By: /s/ Xxxx Xxxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
FTS SYSTEMS, INC.
a New York corporation
By: /s/ Xxxx X. Xxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
KINETIC SYSTEMS, INC.,
a California corporation
By: /s/ Xxxx X. Xxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
KINETIC SYSTEMS CARIBE, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
KINETIC SYSTEMS INTERNATIONAL, INC.,
a California corporation
By: /s/ Xxxx X. Xxxxxx
________________________________________
Name:
_______________________________________
Its:
________________________________________
XXXXXXX CAPITAL III, L.P.
By: Xxxxxxx Brothers III, LLC
Its: General Partner
By: /s/ Xxxxxxx Xxxxxxx
________________________________________
Name: Xxxxxxx Xxxxxxx
Title: Managing Member
STRATEGIC ENTREPRENEUR FUND III, L.P.
By: /s/ Xxxxxxx Xxxxxxx
________________________________________
Name: Xxxxxxx Xxxxxxx
Title: General Partner
MIDOCEAN CAPITAL INVESTORS, LP
By: MidOcean Capital Partners, LP
Its: General partner
By: /s/ Xxxxx Xxxxxx
________________________________________
Name:
Title:
MIDOCEAN CELERITY INVESTMENT PARTNERS, LP
By: MidOcean Celerity Holdings, LLC
Its: General partner
By: /s/ Xxxxx Xxxxxx
________________________________________
Name:
Title:
GRYPHON PARTNERS II, L.P.,
a Delaware limited partnership
By: Gryphon GenPar II, L.L.C.,
a Delaware limited partnership
Its: General Partner
By: /s/ Xxxxxxx X. Xxx
_______________________________________
Name: Xxxxxxx X. Xxx
Title: Member and Principal
GRYPHON PARTNERS II-A, L.P.,
a Delaware limited partnership
By: Gryphon GenPar II, L.L.C.,
a Delaware limited partnership
Its: General Partner
By: /s/ Xxxxxxx X. Xxx
________________________________________
Name: Xxxxxxx X. Xxx
Title: Member and Principal
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx, XX
_________________________________________
Name:_______________________________________
Its:________________________________________
ARES CORPORATE OPPORTUNITIES FUND, L.P.
By: ACOF Management, L.P.
Its: General Partner
By: ACOF Operating Manager, L.P.
Its: General Partner
By: Ares Management, Inc.
Its: General Partner
By:_________________________________________
Name:_______________________________________
Its:________________________________________
ARES LEVERAGED INVESTMENT FUND II, L.P.
By: ARES Management II, L.P.
Its: General Partner
By:_________________________________________
Name:_______________________________________
Its:________________________________________
ARES TOTAL VALUE FUND, L.P.
By: Ares Total Value Management LLC
Its: General Partner
By:_________________________________________
Name:_______________________________________
Its:________________________________________
ARES III CLO, LTD.
By: ARES CLO Management LLC
Its: Investment Manager
By:_________________________________________
Name:_______________________________________
Its:________________________________________
ARES IV CLO, LTD.
By: Ares CLO Management IV, L.P.
Its: Investment Manager
By: Ares CLO XX XX, LLC
Its: Managing Member
By:_________________________________________
Name:_______________________________________
Its:________________________________________
ARES VII CLO LTD.
By: Ares CLO Management VII, L.P.,
Its: Investment Manager
By: Ares CLO GP VII, LLC,
Its: General Partner
By:_________________________________________
Name:_______________________________________
Its:________________________________________
ARES VIII CLO LTD.
By: Ares CLO Management VIII, L.P.,
Its: Investment Manager
By: Ares CLO GP VIII, LLC,
Its: General Partner
By:_________________________________________
Name:_______________________________________
Its:________________________________________
TCP ENTITIES
XXXXXXXXXX CAPITAL PARTNERS, LLC, AS AGENT
By: XXXXXXXXXX & CO., LLC
Its: Managing Member
SPECIAL VALUE ABSOLUTE RETURN FUND,
LLC, as Purchaser
By: SVAR/MM, LLC
Its: Managing Member
By: XXXXXXXXXX CAPITAL PARTNERS, LLC
Its: Managing Member
By: XXXXXXXXXX & CO., LLC
Its: Managing Member
SPECIAL VALUE BOND FUND, LLC,
By: SVIM/MSM, LLC
Its: Manager
By: XXXXXXXXXX & CO., LLC
Its: Managing Member
SPECIAL VALUE BOND FUND II, LLC,
By: SVIM/MSM II, LLC
Its: Managing Member
By: XXXXXXXXXX & CO., LLC
Its: Managing Member
X.X. XXXXX FAMILY CHARITABLE LEAD
ANNUITY TRUST - 2000
By: XXXXXXXXXX CAPITAL PARTNERS, LLC
Its: Investment Manager
By: XXXXXXXXXX & CO., LLC
Its: Managing Member
Each of the above by: /s/ Xxxxxxx Xxxxxxxxxx
_________________________
Name:_______________________
Title:______________________
Address for Notices:
00000 Xxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
