TERMINATION AND SETTLEMENT AGREEMENT
Exhibit 10.2
TERMINATION AND SETTLEMENT AGREEMENT, dated as of October 22, 2007 (this “Agreement”),
among XXXXXX INTERNATIONAL INDUSTRIES, INCORPORATED, a Delaware corporation (the
“Company”), KHI PARENT INC., a Delaware corporation (“Parent”), KHI MERGER SUB
INC., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), KKR
2006 FUND, L.P. (“KKR Fund”), KOHLBERG KRAVIS XXXXXXX & CO. L.P. (“KKR & Co.” and,
together with KKR Fund, “KKR”), and GS CAPITAL PARTNERS VI FUND, L.P., GS CAPITAL PARTNERS
VI PARALLEL, L.P., GS CAPITAL PARTNERS VI GMBH & CO. KG, and GS CAPITAL PARTNERS VI OFFSHORE FUND,
L.P. (collectively, “GSCP” and together with Parent, Merger Sub and KKR, the “Sponsor
Parties”).
RECITALS
WHEREAS, Parent, Merger Sub and the Company entered into an Agreement and Plan of Merger,
dated as of April 26, 2007 (the “Merger Agreement”), pursuant to which Merger Sub was to be
merged with and into the Company on the terms and subject to the conditions set forth in the Merger
Agreement (the “Merger”).
WHEREAS, concurrently with the execution of the Merger Agreement, KKR Fund, GS Capital
Partners VI Parallel, L.P., GS Capital Partners VI GmbH & Co. KG, GS Capital Partners VI Fund, L.P.
and GS Capital Partners VI Offshore Fund, L.P., each a guarantor (the “Guarantors”) entered
into guarantees (the “Guarantees”) in favor of the Company with respect to certain of
Parent’s obligations under the Merger Agreement.
WHEREAS, Parent and Merger Sub have determined that they are not obligated to proceed with the
Merger based on their belief that a Company Material Adverse Effect has occurred and their belief
that the Company has violated the capital expenditures covenant in the Merger Agreement.
WHEREAS, the Company steadfastly denies that a Company Material Adverse Effect has occurred or
that the Company violated the capital expenditures covenant in the Merger Agreement.
WHEREAS, the Company believes that it is entitled to the Parent Termination Fee because Parent
and Merger Sub are not proceeding with the Merger and their other obligations under the Merger
Agreement.
WHEREAS, the Sponsor Parties believe that the Company is not entitled to the Parent
Termination Fee and that the Sponsor Parties are entitled to Parent Expenses under the Merger
Agreement because of the aforementioned circumstances.
WHEREAS, the Company and the Sponsor Parties believe that litigation relating to the foregoing
matters would be expensive, time-consuming, distracting and disruptive, and the parties have
entered into this Agreement to avoid the expense, time consumption, distraction, disruption and
uncertainty of litigation relating thereto.
WHEREAS, the Board of Directors of the Company (the “Company Board”) has (i)
determined that it is advisable and in the best interest of the Company and its stockholders to
enter into this Agreement and (ii) approved the execution, delivery and performance by the Company
of this Agreement and the transactions contemplated hereby.
WHEREAS, the board of directors (or equivalent governing body) of each of the Sponsor Parties
has approved such Sponsor Party entering into this Agreement and declared it advisable for such
Sponsor Party to enter into this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the respective representations,
warranties, covenants and agreements contained herein, and intending to be legally bound, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Unless otherwise specifically defined herein, each
capitalized term used but not defined herein shall have the meaning assigned to such term in the
Merger Agreement.
ARTICLE II
SETTLEMENT
Section 2.1 Settlement.
(a) Simultaneously with the execution and delivery of this Agreement: (i) KKR, an Affiliate of
KKR and GSCP each shall execute and deliver to the Company the Note Purchase Agreement, dated of
even date herewith (the “Note Purchase Agreement”), for $400 million aggregate principal
amount of convertible senior notes (the “Notes”); and (ii) the Company shall execute and
deliver to KKR, an Affiliate of KKR and GSCP the Note Purchase Agreement.
(b) On the terms and subject to the conditions set forth in the Note Purchase Agreement, (i)
the Purchasers (as such term is defined in the Note Purchase Agreement), including Affiliates of
KKR and GSCP, shall purchase the Notes and (ii) the Company shall issue the Notes to the Purchasers
against payment to the Company of the purchase price for such Notes by wire transfer to the Company
of immediately available funds.
ARTICLE III
TERMINATION
Section 3.1 Termination of Merger Agreement. Upon the closing of the sale and purchase
of the Notes as contemplated by the Note Purchase Agreement (the “Closing Date”), (a)
pursuant to Section 7.01(a) of the Merger Agreement, the Merger Agreement is hereby
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terminated in its entirety, is null and void and there shall be no liability or obligation on
the part of the Company, Parent, Merger Sub, the Sponsor Parties or their respective Subsidiaries
or Affiliates under the Merger Agreement, except that the Confidentiality Agreement (as amended
pursuant to the Note Purchase Agreement) will survive the termination of the Merger Agreement and
the execution and delivery of this Agreement by each of the parties hereto and (b) without any
further actions by any Person (i) the Guarantees and (ii) the Election Agreement, dated April 26,
2007, between Parent and Xx. Xxxxxx Xxxxxx, are hereby terminated, are null and void, and are of no
further force and effect. The parties hereto acknowledge that by virtue of the termination of the
Merger Agreement, the Equity Commitment Letters and the Debt Commitment Letters shall terminate in
accordance with their terms.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Company. The Company hereby
represents and warrants that (a) this Agreement has been duly authorized, executed and delivered by
the Company and, assuming this Agreement constitutes the valid and binding agreement of the Sponsor
Parties, is the valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms and (b) no material consent of any third party is required for the
execution, delivery and performance of this Agreement by the Company.
Section 4.2 Representations and Warranties of the Sponsor Parties. Each of the Sponsor
Parties hereby represents and warrants that: (a) this Agreement has been duly authorized, executed
and delivered by such Sponsor Party and, assuming this Agreement constitutes the valid and binding
agreement of the Company, this Agreement is the valid and binding obligation of such Sponsor Party,
enforceable against such Sponsor Party in accordance with its terms and (b) no material consent of
any third party is required for the execution, delivery and performance of this Agreement by such
Sponsor Party.
ARTICLE V
RELEASES AND COVENANT NOT TO XXX
Section 5.1 Company Release. Effective as of the Closing Date, the Company, for
itself and its officers, directors, predecessor entities, successors and assigns, parents,
subsidiaries, Affiliates and employees (other than employees acting solely as stockholders of the
Company or solely as participants in benefit plans of the Company) (“Company Releasing
Parties”), hereby fully releases and discharges the Sponsor Parties, their parents,
subsidiaries and Affiliates and their respective officers, directors, managing directors, partners,
members, predecessor entities, successors and assigns, parents, subsidiaries, Affiliates, employees
and attorneys and other advisors and agents (including debt and equity financing sources)
(collectively, “Sponsor Released Persons”) from any and all claims, actions, causes of
action, demands and charges of whatever nature, known or unknown, arising out of, or relating to
any of the Merger Agreement or the Guarantees or the transactions contemplated thereby, including
any claim relating to the termination of the Merger Agreement, or the Parent Termination Fee set
forth in Section 7.02 of the Merger Agreement and including any acts, omissions, disclosure or
communications related
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to the Merger Agreement or the Guarantees or the transactions contemplated thereby (the
“Company Released Claims”); provided that, for the avoidance of doubt, nothing contained
herein shall be deemed to release any party hereto from its obligations under this Agreement, the
Note Purchase Agreement or the registration rights agreement and indenture being executed in
connection herewith.
Section 5.2 Sponsor Party Releases. Effective as of the Closing Date, the Sponsor
Parties, for themselves and their respective officers, directors, predecessor entities, successors
and assigns, parents, subsidiaries, Affiliates, and employees (“Sponsor Releasing
Parties”), hereby fully release and discharge the Company, its subsidiaries and Affiliates and
their respective officers, directors, predecessor entities, successors and assigns, parents,
subsidiaries, Affiliates, employees and attorneys and other advisors and agents (collectively,
“Company Released Persons” and, together with the Sponsor Released Persons, “Released
Persons”) from any and all claims, actions, causes of action, demands and charges of whatsoever
nature, known or unknown, arising out of, or relating to any of the Merger Agreement or the
Guarantees or the transactions contemplated thereby, including any claim relating to the
termination of the Merger Agreement, or payment or reimbursement of any of the expenses of Parent
or Merger Sub in connection with the Merger and including any acts, omissions, disclosure or
communications related to the Merger Agreement or the Guarantees or the transactions contemplated
thereby (the “Sponsor Party Released Claims” and together with the Company Released Claims,
the “Released Claims”); provided that, for the avoidance of doubt, nothing contained herein
shall be deemed to release any party hereto from its obligations under this Agreement, the Note
Purchase Agreement or the registration rights agreement and indenture being executed in connection
herewith.
Section 5.3 Scope of Release and Discharge. The parties acknowledge and agree that
they may be unaware of or may discover facts in addition to or different from those which they now
know or believe to be true related to or concerning the Released Claims. The parties know that
such presently unknown or unappreciated facts could materially affect the claims or defenses of a
party or parties. It is nonetheless the intent of the parties to give a full and complete release
and discharge of the Released Claims. To that end, with respect to the Released Claims only, the
parties expressly waive and relinquish any and all provisions, rights and benefits conferred by any
law of the United States or of any state or territory of the United States or of any other relevant
jurisdiction, or principle of common law, which is similar, comparable or equivalent to § 1542 of
the California Civil Code. With respect to the Released Claims only, the Parties expressly waive
and relinquish, to the fullest extent permitted by law, the provisions, rights, and benefits of §
1542 of the California Civil Code, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Section 5.4 Covenant not to Xxx. Each of the parties hereto covenants, on behalf of
itself and the Company Releasing Parties, in the case of the Company, or the Sponsor Releasing
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Parties, in the case of the Sponsor Parties, not to bring any Released Claim before any court,
arbitrator, or other tribunal in any jurisdiction, whether as a claim, a cross-claim, or
counterclaim. Any Released Person may plead this Agreement as a complete bar to any Released Claim
brought in derogation of this covenant not to xxx.
Section 5.5 Accord and Satisfaction. This Agreement and the releases reflected herein
shall be effective as a full and final accord and satisfaction and release of all of the Released
Claims.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Publicity. Immediately following the execution and delivery of this
Agreement, the Company shall issue a press release announcing the execution of this Agreement,
which press release shall be subject to the prior review and approval of the Sponsor Parties. None
of the parties hereto will make any public statements (including in any filing with the SEC or any
other regulatory or governmental agency, including any stock exchange) that are inconsistent with,
or otherwise contrary to, the statements in the press releases issued pursuant to this Section 6.1.
Section 6.2 Non-Disparagement. Other than as a party may determine is necessary or
appropriate to respond to any legal or regulatory process or proceeding or to give appropriate
testimony or file any necessary documents in any legal or regulatory proceeding, or deliberations
of the Company Board, no party to this Agreement shall make any public statements or any private
statements that disparage, denigrate or malign the other parties or the Released Persons concerning
the subject matter of this Agreement and the Merger Agreement or the business or practices of the
other parties hereto. This Agreement constitutes the settlement of disputed claims; it does not
and shall not constitute an admission of liability by any of the parties hereto, including any
admission that there occurred a Company Material Adverse Effect or any breach of the Merger
Agreement. Nothing contained in this Section 6.2 shall prohibit a party from making any public or
private statement that is factually accurate.
Section 6.3 Counterparts; Effectiveness. This Agreement may be executed in two or more
consecutive counterparts (including by facsimile), each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same instrument, and shall become
effective when one or more counterparts have been signed by each of the parties and delivered (by
telecopy or otherwise) to the other parties.
Section 6.4 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
Section 6.5 Notices. Any notice shall be sufficient if in writing, and sent by
facsimile transmission with confirmation (provided that any notice received by facsimile
transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m.
(addressee’s local time) shall be deemed to have been received at 9:00 a.m. (addressee’s local
time) on the next Business Day), by reliable overnight delivery service (with proof of service),
hand delivery or
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certified or registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
(a) if to the Sponsor Parties, to:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Xx. X.X.
0 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
0 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
and
c/o Goldman Xxxxx Capital Partners
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx
Xxx Xxxxx
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx
Xxx Xxxxx
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
(b) if to the Company, to:
Xxxxxx International Industries, Incorporation
0000 Xxxxxxxxxxxx Xxx. X.X.
Xxxxx 0000, Xxxxxxxxxx X.X. 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
0000 Xxxxxxxxxxxx Xxx. X.X.
Xxxxx 0000, Xxxxxxxxxx X.X. 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxx Day
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
and:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
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Section 6.6 Assignment; Binding Effect. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of Law or otherwise) without the prior written consent of the other parties. This
Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and, subject to the preceding sentence, assigns.
Section 6.7 Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, such provision shall be interpreted to be only as broad as is
enforceable.
Section 6.8 Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement of the parties hereto with respect to the subject matter hereof,
and supersedes all other prior agreements and understandings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof and thereof; provided, however,
that the confidentiality obligations of the parties set forth in the Confidentiality Agreement and
the Note Purchase Agreement shall not be superseded and shall remain in full force and effect.
Each party hereto acknowledges and agrees that each of the non-party Released Persons are express
third party beneficiaries of the releases of such non-party Released Persons contained in Sections
5.1, 5.2 and 5.3 and covenants not to xxx contained in Section 5.4 of this Agreement and are
entitled to enforce rights under such sections to the same extent that such non-party Released
Persons could enforce such rights if they were a party to this Agreement. Except as provided in
the preceding sentence, there are no third party beneficiaries to this Agreement, and this
Agreement is not otherwise intended to and shall not otherwise confer upon any Person other than
the parties hereto any rights or remedies hereunder.
Section 6.9 Headings. Headings of the Articles and Sections of this Agreement are for
convenience of the parties only and shall be given no substantive or interpretive effect
whatsoever.
Section 6.10 Interpretation. When a reference is made in this Agreement to an Article
or Section, such reference shall be to an Article or Section of this Agreement unless otherwise
indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement,
they shall be deemed to be followed by the words “without limitation.” The words “hereof,”
“herein” and “hereunder” and words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of this Agreement. The word “or”
shall be deemed to mean “and/or.” The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and instruments
incorporated therein. Each of the parties has participated in the drafting and negotiation of this
Agreement. If an ambiguity or question of intent or interpretation arises, this
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Agreement must be construed as if it is drafted by all the parties, and no provision of this
Agreement shall be construed against any party based on its authorship of any of the provisions of
this Agreement.
[Remainder of the Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and
delivered as of the date first above written.
| XXXXXX INTERNATIONAL INDUSTRIES, | ||||||
| INCORPORATED | ||||||
| By: | /s/ Xxxxxx Xxxxxx | |||||
| Title: Executive Chairman | ||||||
| KHI PARENT INC. | ||||||
| By: | /s/ Xxxxx Xxxxxxx | |||||
| Name: Xxxxx Xxxxxxx | ||||||
| Title: President | ||||||
| KHI MERGER SUB INC. | ||||||
| By: | /s/ Xxxxx Xxxxxxx | |||||
| Name: Xxxxx Xxxxxxx | ||||||
| Title: President | ||||||
| KOHLBERG KRAVIS XXXXXXX & CO. L.P. | ||||||
| By: | KKR & Co. L.L.C., its general partner | |||||
| By: | /s/ Xxxxx Xxxxxxx | |||||
| Name: Xxxxx Xxxxxxx | ||||||
| Title: Member | ||||||
| KKR 2006 FUND L.P. | ||||||
| By: | KKR Associates 2006 L.P., its general partner | |||||
| By: | KKR 2006 GP LLC, its general partner | |||||
| By: | /s/ Xxxxx Xxxxxxx | |||||
| Name: Xxxxx Xxxxxxx | ||||||
| Title: Member | ||||||
[SIGNATURE PAGE — TERMINATION AND SETTLEMENT AGREEMENT]
| GS CAPITAL PARTNERS VI PARALLEL, L.P. | ||||||
| By: | GS Advisors VI, L.L.C., its General Partner | |||||
| By: | /s/ Xxxxxxxxx X. Xxxxxxx | |||||
| Name: Xxxxxxxxx X. Xxxxxxx | ||||||
| Title: Managing Director | ||||||
| GS CAPITAL PARTNERS VI GMBH & CO. KG | ||||||
| By: | GS Advisors VI, L.L.C., its Managing Limited Partner | |||||
| By: | /s/ Xxxxxxxxx X. Xxxxxxx | |||||
| Name: Xxxxxxxxx X. Xxxxxxx | ||||||
| Title: Managing Director | ||||||
| GS CAPITAL PARTNERS VI FUND, L.P. | ||||||
| By: | GS Advisors VI, L.L.C., its General Partner | |||||
| By: | /s/ Xxxxxxxxx X. Xxxxxxx | |||||
| Name: Xxxxxxxxx X. Xxxxxxx | ||||||
| Title: Managing Director | ||||||
| GS CAPITAL PARTNERS VI OFFSHORE FUND, L.P. | ||||||
| By: | GS VI Offshore Advisors, L.L.C., its General Partner | |||||
| By: | /s/ Xxxxxxxxx X. Xxxxxxx | |||||
| Name: Xxxxxxxxx X. Xxxxxxx | ||||||
| Title: Managing Director | ||||||
[SIGNATURE PAGE — TERMINATION AND SETTLEMENT AGREEMENT]
