RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT (this "Agreement") dated as of May 5,
1997 among Kaynar Holdings Inc. ("Parent"), Kaynar Technologies Inc. ("Opco")
and General Electric Capital Corporation (the "Preferred Stockholder") relates
to (i) the Certificate of Designation of Series A Convertible Preferred Stock of
Parent, (ii) the Certificate of Designation of Series B Convertible Preferred
Stock of Parent and (iii) the PIK Dividend Note Agreement dated as of January 3,
1994 (the "PIK Dividend Note Agreement") among Parent, the Preferred Stockholder
and the other Holders (as defined therein). Unless otherwise defined herein,
capitalized terms are used herein with the meanings ascribed to them in the PIK
Dividend Note Agreement.
RECITALS
WHEREAS, Parent and Opco have proposed a recapitalization pursuant
to which (A) the Certificate of Incorporation and Bylaws of Parent shall be
amended and restated in the forms attached hereto as Exhibits 1 and 2,
respectively, (B) each outstanding share of Common Stock shall be split into
68 shares of Common Stock, (C) each outstanding share of Series A Preferred
Stock shall be exchanged for 9.953 shares of Common Stock and 58.057 shares
of Series C Convertible Preferred Stock, par value $0.01 per share, having
the terms set forth in the Restated Certificate of Incorporation referred to
herein (the "Series C Preferred Stock") and (D) each outstanding share of
Series B Preferred Stock shall be exchanged for 68 shares of Series C
Convertible Preferred Stock (the actions described in clauses (A) through (D)
are referred to herein as the "Recapitalization");
WHEREAS, Parent and Opco have further proposed a merger pursuant to
which (A) Opco shall merge with and into Parent on the terms set forth in the
Agreement and Plan of Merger attached hereto as Exhibit 4, (B) Parent, as the
surviving entity, shall assume all liabilities of Opco and (C) Parent shall
change its name to "Kaynar Technologies Inc." (the actions described in
clauses (A) through (C) are referred to herein as the "Merger"; the merged
entities are referred to herein as "KTI"); and
WHEREAS, Parent and Opco have further proposed that KTI sell in a
public offering up to 2,100,000 shares of Common Stock (the "Offering"), as
described in the Prospectus dated April 11, 1997 filed with the Securities
and Exchange Commission as part of Registration Statement No. 333-22345 (the
"Registration Statement");
NOW, THEREFORE, in consideration of the foregoing premises (all of
which are incorporated herein as a part of this Agreement) and for other good
and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Preferred
Stockholder agrees as follows:
1. CONSENT TO RECAPITALIZATION, MERGER AND OFFERING. Subject to the
terms and conditions set forth herein, the Preferred Stockholder hereby, as of
the Effective Date, consents to the Recapitalization, the Merger and the
Offering.
2. WAIVER OF CERTAIN COVENANTS AND NOTICE REQUIREMENTS. Subject to
the terms and conditions set forth herein, the Preferred Stockholder agrees to
waive:
(a) The provisions of Section 8.11 of the PIK Dividend Note Agreement
in respect (and solely in respect) of the Offering;
(b) The provisions of Sections 7.01 and 8.09 of the PIK Dividend Note
Agreement and Section 4 of each of the Certificates of Designation in
respect (and solely in respect) of the Merger; and
(c) The provisions of Section 8.12 of the PIK Dividend Note Agreement
in respect (and solely in respect) of the Recapitalization.
3. EFFECTIVE DATE. This Agreement shall become effective upon the
date (the "Effective Date"), which shall be no later than May 30, 1997, by which
all of the following conditions shall have been simultaneously satisfied:
(a) the Board of Directors of Parent shall have approved and
authorized the Recapitalization, the Merger and the Offering and adopted
(i) the Amended and Restated Certificate of Incorporation of Parent in the
form of Exhibit 1 hereto (the "Restated Certificate of Incorporation"),
(ii) the Amended and Restated Bylaws of Parent in the form of Exhibit 2
hereto, (iii) the Certificate of Merger in the form of Exhibit 3 hereto
(the "Merger Certificate"), (iv) the Agreement and Plan of Merger in the
form of Exhibit 4 hereto (the "Merger Agreement"), (v) the Stockholders
Agreement in the form of Exhibit 5 hereto (the "Stockholders Agreement"),
(vi) the 1997 Stock Incentive Plan in the form of Exhibit 6 hereto, (vii)
the forms of employment agreements attached as Exhibit 7 hereto, (viii) the
Underwriting Agreement in the form of Exhibit 8 hereto (the "Underwriting
Agreement") and (ix) the Indemnification and Contribution Agreement in the
form of Exhibit 9 hereto (the "Indemnification Agreement");
(b) the Management Investors shall have approved and authorized the
Recapitalization, the Merger and the Offering and each of the documents
referred to in clauses (i), (iv) and (vi) of Section 3(a) hereof;
(c) the Board of Directors of Opco shall have approved and authorized
the Merger and adopted the Merger Agreement;
(d) the Management Investors shall have executed and delivered to the
Preferred Stockholder the Stockholders Agreement;
(e) the two nominees of the Preferred Stockholder shall have been
elected to the Board of Directors of Parent and shall have been appointed
to each of the Audit and Compensation Committees thereof;
(f) Parent and Xxxxxx Brothers Inc. (as representative of the
underwriters) shall have executed and delivered to the Preferred
Stockholder counterparts of the Underwriting Agreement;
(g) Parent shall have executed and delivered the Indemnification
Agreement to the Preferred Stockholder; and
(h) Parent shall have delivered to the Preferred Stockholder a
certificate of an executive officer of KTI stating that the conditions
described in this Section 3 have been satisfied.
4. CONDITIONS SUBSEQUENT. The consents set forth in Section 1
hereof and the waivers set forth in Section 2 hereof shall cease to be effective
unless the First Delivery Date (as defined in the Underwriting Agreement) shall
have occurred on or before May 30, 1997 and the following shall have occurred on
or before the First Delivery Date:
(a) the Preferred Stockholder shall have received payment in full in
cash of all Obligations then due and payable under the PIK Dividend Note
Agreement and the Notes;
(b) the Restated Certificate of Incorporation and the Merger
Agreement shall have been executed by each of the parties thereto and filed
with the Secretary of State of the State of Delaware, and the Merger shall
be effective;
(c) Parent shall have entered into employment agreements in the form
of Exhibit 7 hereto with each of the Management Investors (other than
Xxxxxx X. Xxxxxxxx) who is an employee of Parent;
(d) O'Melveny & Xxxxx LLP, counsel to Parent, Opco and KTI, shall
have delivered to the Preferred Stockholder an opinion in form and
substance satisfactory to the Preferred Stockholder and its counsel stating
that (i) the Preferred Stockholder is entitled to rely on the opinion
delivered pursuant to Section 9(e) of the Underwriting Agreement as though
the opinion were addressed to the Preferred
Stockholder, (ii) the Stockholders Agreement has been duly authorized by
KTI and is legal, valid, binding and enforceable against KTI in accordance
with its terms and (iii) the shares of Series C Preferred Stock delivered
to the Preferred Stockholder have been duly authorized and validly issued
and are fully paid and non-assessable;
(e) Xxxxxx Xxxxxxxx LLP shall have delivered to the Preferred
Stockholder a letter in form and substance satisfactory to the Preferred
Stockholder and its counsel regarding procedures performed by Xxxxxx
Xxxxxxxx LLP in connection with the preparation of the Registration
Statement; and
(f) all of the documents and agreements referred to in Section 3(a)
shall be in full force and effect, and there shall not have been any
amendments, modifications or supplements thereto which have not been
approved in writing by the Preferred Stockholder.
5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
6. GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Opco, Parent and the Preferred Stockholder have
caused this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
KAYNAR HOLDINGS INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
KAYNAR TECHNOLOGIES INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Name: Xxxxx X. Xxxxxx
Title: Authorized Signatory
EXHIBITS
Exhibit 1 - Amended and Restated Certificate of Incorporation of Parent
Exhibit 2 - Amended and Restated Bylaws of Parent
Exhibit 3 - Certificate of Merger
Exhibit 4 - Agreement and Plan of Merger between Opco and Parent
Exhibit 5 - Stockholders Agreement among KTI, the Preferred Stockholder
and the Management Investors
Exhibit 6 - 1997 Stock Incentive Plan of Parent
Exhibit 7 - Forms of Employment Agreements
Exhibit 8 - Underwriting Agreement among KTI, the Preferred Stockholder
and the underwriters named therein
Exhibit 9 - Indemnification and Contribution Agreement
between KTI and the Preferred Stockholder
