Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

This SETTLEMENT AGREEMENT (this “Agreement”) is made and entered into as of May
9, 2019, by and among Knowles Corporation, a Delaware corporation (the
“Company”), on the one hand, and Caligan Partners CV I LP, a Cayman Islands
exempted limited partnership (“Caligan CV I”), Caligan Partners LP, a Delaware
limited partnership, Caligan Partners CV GP LLC, a Delaware limited liability
company, Caligan Partners GP, LLC, a Delaware limited liability company, Falcon
Edge Capital, LP, a Delaware limited partnership, Falcon Edge (Cayman) GP, Ltd.,
a Cayman Islands Corporation, Falcon Edge Global Master Fund, LP, a Cayman
Islands exempted limited partnership, Moraine Master Fund, LP, a Cayman Islands
exempted limited partnership, Patriot Global Management, LP, a Delaware limited
partnership, Samuel J. Merksamer, an individual, David E. Johnson, an
individual, and Jonathan Christodoro, an individual (the foregoing, together
with Caligan CV I, and collectively with each of their respective Affiliates,
the “Investor Group”), on the other hand. The Company and the Investor Group are
each herein referred to as a “party” and collectively, the “parties.”

 

WHEREAS, on March 11, 2019, certain members of the Investor Group filed a
Schedule 13D (the “Schedule 13D”) with the SEC;

 

WHEREAS, on January 30, 2019, Caligan CV I submitted notice (the “Initial
Nomination Notice") of its intent to nominate three candidates for election to
the Board of Directors of the Company (the “Board”) at the Company’s 2019 Annual
Meeting of Stockholders (the “2019 Annual Meeting”);

 

WHEREAS, on March 11, 2019, Caligan CV I submitted a supplement to the Initial
Nomination Notice (together with the Initial Nomination Notice, the “Nomination
Notice”) whereby Caligan CV I, among other things, withdrew one of its three
director candidates; and

 

WHEREAS, the Company and the Investor Group have determined to come to an
agreement with respect to the composition of the Board and certain other
matters, as provided in this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:

 

1.  Board Composition and Related Matters.

 

(a) Effective upon the execution and delivery of this Agreement, Caligan CV I
has withdrawn the Nomination Notice by submitting the form attached hereto as
Exhibit A to the Company.

 

(b) Effective upon the execution and delivery of this Agreement, the Board
increases the size of the Board from nine to ten directors with a resulting
vacancy in Class III of the Board.

 

 

 

 

(c) Simultaneous with the execution and delivery of this Agreement and as a
condition to the Investor Group’s rights and the Board’s obligations herein,
Steven F. Mayer (the “Investor Group Designee”), has executed and delivered to
the Company a designee agreement in the form attached hereto as Exhibit B (the
“Designee Agreement”).

 

(d) The Company shall, as promptly as practicable following the execution of
this Agreement, but in no case later than two Business Days following the date
of this Agreement, take all action necessary to appoint the Investor Group
Designee to the Board to fill the vacancy resulting from the increase in the
size of the Board as set forth in Section 1(b).

 

(e) The Company shall, with respect to the 2019 Annual Meeting, 2020 Annual
Meeting and, subject to the Company’s delivery of a Renomination Notice pursuant
to Section 11(a) that has not been declined by the Investor Group or the
Investor Group Designee, any subsequent Annual Meetings during the term of this
Agreement, (i) include the Investor Group Designee as a nominee for election to
the Board in its proxy statement and proxy card, (ii) recommend to the
stockholders of the Company the election of the Investor Group Designee to the
Board and (iii) solicit proxies in favor of the election of the Investor Group
Designee to the Board in a manner no less rigorous and favorable than the manner
in which the Company supports its other incumbent nominees.

 

(f) Concurrently with the Investor Group Designee’s appointment to the Board,
the Board shall take the necessary steps to appoint and seat the Investor Group
Designee on at least one committee of the Board, subject to applicable rules of
the SEC and of any stock exchange on which the Company is traded and as selected
by the Board in its sole discretion. The Investor Group Designee shall be
entitled to continuously serve on such committee until the Termination Date.

 

(g) The Investor Group agrees that the Board or any committee thereof, in the
exercise of its fiduciary duties, may recuse the Investor Group Designee from
any portion of a Board or committee meeting, and restrict access to information
of the Company, to the extent relating to (i) this Agreement, including the
interpretation and enforcement thereof, (ii) any demand made by any member of
the Investor Group or any of their respective Affiliates if such demand is
coupled, expressly or implied, with the threat to take any of the actions
prohibited in Sections 3(a) through 3(l), (iii) the Designee Agreement, (iv) the
Investor Group Designee’s failure to comply with the Company’s Amended and
Restated Certificate of Incorporation (as amended and as may be further amended
from time to time, the “Charter”), the Company’s Amended and Restated By-Laws
(as amended and as may be further amended from time to time, the “By-Laws”) or
policies that are applicable to all directors or (v) any proposed transaction
between the Company and any member of the Investor Group or any of their
respective Affiliates. For the avoidance of doubt, the Investor Group
acknowledges and agrees that: (A) pursuant to the Designee Agreement and
consistent with his fiduciary duties as a director of the Company, the Investor
Group Designee is obligated to consider in good faith, to the same extent as any
other director of the Company, recusal from any Board or committee meeting in
the event there is any other actual or potential conflict of interest between
the Investor Group or the Investor Group Designee, on the one hand, and the
Company, on the other hand; and (B) the Board may restrict the Investor Group
Designee’s access to information of the Company to the same extent it would for
any other director of the Company, in accordance with applicable law.

 

2

 

 

(h) The Investor Group agrees that there shall be no contracts, plans or
arrangements, written or otherwise, in effect during the term of this Agreement,
between any members of the Investor Group and the Investor Group Designee
providing for any compensation, reimbursement of expenses or indemnification of
the Investor Group Designee in connection with or related to the Investor Group
Designee’s service on the Board, other than the reimbursement agreement (the
“Reimbursement Agreement”) in the form attached hereto as Exhibit C.

 

(i) The Investor Group acknowledges and agrees that if at any time during the
term of this Agreement the Investor Group and its Affiliates’ aggregate Net Long
Position falls below 4,549,989 shares of common stock of the Company, par value
$0.01 per share (the “Common Stock”) (subject to adjustment for stock splits,
reclassifications and combinations, the “Ownership Minimum”), (i) the rights of
the members of the Investor Group and the obligations of the Company pursuant to
this Section 1 shall terminate immediately and (ii) the Investor Group Designee
is obligated to immediately tender his resignation pursuant to the Designee
Agreement (it being understood that the Board shall have the right to decline to
accept such resignation).

 

(j) Until the Termination Date and as long as the Investor Group and its
Affiliates’ Net Long Position exceeds the Ownership Minimum, in the event that
the Investor Group Designee is no longer able to serve as a director of the
Company due to death, disability or other incapacity, the members of the
Investor Group shall be entitled to designate, subject to the approval of the
Governance and Nominating Committee of the Board (the “Governance and Nominating
Committee”), a candidate for replacement of the Investor Group Designee (such
replacement, a “Replacement Designee”). Any Replacement Designee shall qualify
as an “independent director” under applicable rules of the SEC, the rules of any
stock exchange on which the Company is traded and applicable governance policies
of the Company. The Governance and Nominating Committee shall, in good faith and
consistent with its fiduciary duties, approve or deny any candidate for
Replacement Designee within ten Business Days after such candidate has: (i)
successfully completed a customary background check; (ii) completed a
satisfactory interview with the Governance and Nominating Committee; (iii)
provided the Company with (A) a completed director questionnaire (in the form to
be provided by the Company), (B) an executed Designee Agreement and (C) such
other information required by the documents described in the Designee Agreement
or as may be reasonably requested by the Company and (iv) agreed to take all
necessary action not be considered to be “overboarded” under the applicable
policies of Institutional Shareholder Services, Inc. (“ISS”) and/or Glass Lewis
& Co., LLC (“Glass Lewis”) as a result of his or her appointment to the Board.
In the event the Governance and Nominating Committee declines to approve a
candidate for Replacement Designee, (i) any agreements provided by such
candidate pursuant to the previous sentence shall be null and void and of no
effect and (ii) the members of the Investor Group may propose one or more
additional candidates, subject to the approval process described above, until a
Replacement Designee is approved by the Governance and Nominating Committee.
Following the approval of a candidate for Replacement Designee by the Governance
and Nominating Committee, the Board shall promptly appoint such Replacement
Designee to the Board. Upon his or her appointment to the Board, such
Replacement Designee shall be deemed to be an Investor Group Designee for all
purposes under this Agreement.

 

3

 

 

(k) No later than the date that is 120 calendar days after the Company’s 2020
Annual Meeting, the Board and the members of the Investor Group shall cooperate
to identify a mutually acceptable Independent Director (the “New Independent
Director”) for appointment to the Board. If the Company and the members of the
Investor Group, after good faith efforts, are not able to identify a mutually
acceptable candidate to serve as the New Independent Director by such date, then
the Board, in its sole discretion, shall take all actions reasonably necessary
to select a New Independent Director in accordance with the Board’s internal
procedures and consistent with all applicable corporate governance policies of
the Company; provided, that appointment of the New Independent Director shall be
subject to the approval of the members of the Investor Group (not to be
unreasonably withheld, conditioned or delayed). Following the selection of the
New Independent Director and the approval of the members of the Investor Group,
the Board shall promptly appoint the New Independent Director to the Board.

 

2. Voting Commitment. Until the Termination Date, the members of the Investor
Group shall, or shall cause their Representatives to, appear in person or by
proxy at each Stockholder Meeting and to vote all shares of Common Stock
beneficially owned by it and over which it has voting power in accordance with
the Board’s recommendations as such recommendations of the Board are set forth
in the applicable definitive proxy statement filed in respect thereof with
respect to (a) the election, removal and/or replacement of directors (a
“Director Proposal”) and (b) any other proposal submitted to the stockholders at
a Stockholder Meeting other than a proposal with respect to an Extraordinary
Transaction, in each case as such recommendation of the Board is set forth in
the applicable definitive proxy statement filed in respect thereof; provided,
however, that in the event both ISS and Glass Lewis make voting recommendations
that differ from the voting recommendation of the Board with respect to any
Company proposal (other than Director Proposals) submitted to the stockholders
at any Stockholder Meeting, the members of the Investor Group shall be permitted
to vote all or some shares of Common Stock they beneficially own and over which
they have voting power at such Stockholder Meeting in accordance with the ISS
and Glass Lewis recommendations.

 

3. Standstill. Prior to the Termination Date, except as otherwise provided in
this Agreement (including Section 11(a)), without the prior written consent of
the Board, the members of the Investor Group shall not, and shall instruct their
Affiliates, not to, directly or indirectly (in each case, except as permitted by
this Agreement):

 

(a) (i) acquire, offer or seek to acquire, agree to acquire or acquire rights to
acquire (except by way of stock dividends or other distributions or offerings
made available to holders of voting securities of the Company generally on a pro
rata basis), directly or indirectly, whether by purchase, tender or exchange
offer, through the acquisition of control of another person, by joining a group,
through swap or hedging transactions or otherwise, any voting securities of the
Company (other than through a broad-based market basket or index) or any voting
rights decoupled from the underlying voting securities which would result in the
ownership or control of, or other beneficial ownership interest in, 10.0% or
more than of the then-outstanding shares of the Common Stock in the aggregate
(the “Ownership Cap”); provided, however, that the Board may increase the
Ownership Cap by an affirmative vote of a majority of the Board; or (ii) sell
its shares of Common Stock, other than in open market sale transactions where
the identity of the purchaser is not known and in underwritten widely dispersed
public offerings, to any Third Party that, to the Investor Group’s knowledge
(after due inquiry in connection with a private, non-open market transaction, it
being understood that such knowledge shall be deemed to exist with respect to
any publicly available information, including information in documents filed
with the SEC), would result in such Third Party, together with its Affiliates
and Associates, owning, controlling or otherwise having any beneficial or other
ownership interest in the aggregate of more than 4.9% of the shares of Common
Stock outstanding at such time or would increase the beneficial ownership
interest of any Third Party who, together with its Affiliates and Associates,
has a beneficial or other ownership interest in the aggregate of more than 4.9%
of the shares of Common Stock outstanding at such time;

 

4

 

 

(b) (i) other than pursuant to Section 1(j) of this Agreement, nominate,
recommend for nomination or give notice of an intent to nominate or recommend
for nomination a person for election at any Stockholder Meeting at which the
Company’s directors are to be elected; (ii) knowingly initiate, encourage or
participate in any solicitation of proxies in respect of any election contest or
removal contest with respect to the Company’s directors; (iii) submit, initiate,
make or be a proponent of any stockholder proposal for consideration at, or
bring any other business before, any Stockholder Meeting; (iv) knowingly
initiate, encourage or participate in any solicitation of proxies in respect of
any stockholder proposal for consideration at, or other business brought before,
any Stockholder Meeting; or (v) knowingly initiate, encourage or participate in
any “withhold” or similar campaign with respect to any Stockholder Meeting;

 

(c) form, join or in any way participate in any group or agreement of any kind
with respect to any voting securities of the Company, including in connection
with any election or removal contest with respect to the Company’s directors or
any stockholder proposal or other business brought before any Stockholder
Meeting (other than with the members of the Investor Group or one or more of
their Affiliates and Associates who are instructed to comply by the terms and
conditions of this Agreement);

 

(d) deposit any voting securities of the Company in any voting trust or subject
any Company voting securities to any arrangement or agreement with respect to
the voting thereof (other than any such voting trust, arrangement or agreement
solely among members of the Investor Group and otherwise in accordance with this
Agreement);

 

(e) seek publicly, alone or in concert with others, to amend any provision of
the Charter or By-Laws;

 

(f) demand an inspection of the Company’s books and records;

 

(g) (i) make any public or private proposal with respect to or (ii) make any
public statement or otherwise seek to encourage, advise or assist any person in
so encouraging or advising with respect to: (A) any change in the number or term
of directors serving on the Board or the filling of any vacancies on the Board,
(B) any change in the capitalization or dividend policy of the Company, (C) any
other change in the Company’s management, governance, corporate structure,
affairs or policies, (D) any Extraordinary Transaction, (E) causing a class of
securities of the Company to be delisted from, or to cease to be authorized to
be quoted on, any securities exchange or (F) causing a class of equity
securities of the Company to become eligible for termination of registration
pursuant to Section 12(g)(4) of the Exchange Act;

 

5

 

 

(h) knowingly initiate, make or in any way participate, directly or indirectly,
in any Extraordinary Transaction or make, directly or indirectly, any proposal,
either alone or in concert with others, to the Company or the Board that would
reasonably be expected to require a public announcement or disclosure regarding
any such matter;

 

(i) effect or seek to effect, offer or propose to effect, cause or participate
in, or in any way knowingly assist or facilitate any other person to effect or
seek, offer or propose to effect or participate in, any (i) material acquisition
of any assets or businesses of the Company or any of its subsidiaries; (ii)
tender offer or exchange offer, merger, acquisition, share exchange or other
business combination involving any of the voting securities or any of the
material assets or businesses of the Company or any of its subsidiaries; or
(iii) recapitalization, restructuring, liquidation, dissolution or other
material transaction with respect to the Company or any of its subsidiaries or
any material portion of its or their businesses;

 

(j) enter into any negotiations, agreements or understandings with any Third
Party with respect to the foregoing, or advise, assist, encourage or seek to
persuade any Third Party to take any action with respect to any of the
foregoing, or otherwise take or cause any action inconsistent with any of the
foregoing;

 

(k) publicly make or in any way advance publicly any request or proposal that
the Company or the Board amend, modify or waive any provision of this Agreement;
or

 

(l) take any action challenging the validity or enforceability of this Section 3
or this Agreement unless the Company is challenging the validity or
enforceability of this Agreement.

 

provided, however, that (i) the restrictions in this Section 3 shall not prevent
the members of the Investor Group from making (a) any factual statement as
required by applicable legal process, subpoena or legal requirement from any
governmental authority with competent jurisdiction over the party from whom
information is sought (so long as such request did not arise as a result of
action by any of the members of the Investor Group) or (b) any confidential
communication to the Company that would not be reasonably expected to trigger
public disclosure obligations for either party and (ii) the restrictions in this
Section 3 shall not restrict the members of the Investor Group from tendering
shares, receiving payment for shares or otherwise participating in any such
transaction on the same basis as the other stockholders of the Company or from
participating in any such transaction that has been approved by the Board,
subject to the other terms of this Agreement. For the avoidance of doubt,
nothing in this Section 3 shall be deemed to limit the exercise in good faith by
the Investor Group Designee of his fiduciary duties in his capacity as a
director of the Company.

 

4. Mutual Non-Disparagement. Prior to the Termination Date, without the prior
written consent of the other party, neither party shall, nor shall it permit any
of its Representatives to make any public statement about the other party, the
other party’s current or former directors in their capacity as such, officers or
employees (including with respect to such persons’ service at the other party),
the other party’s subsidiaries, or the business of the other party’s
subsidiaries or any of its or its subsidiaries’ current directors, officers or
employees, including the business and current or former directors, officers and
employees of the other party’s controlled Affiliates, as applicable. The
restrictions in this Section 4 shall not (x) apply (i) in any compelled
testimony or production of information, whether by legal process, subpoena or as
part of a response to a request for information from any governmental or
regulatory authority with jurisdiction over the party from whom information is
sought, in each case, to the extent required, or (ii) to any disclosure that
such party reasonably believes, after consultation with outside counsel, to be
legally required by applicable law, rules or regulations; or (y) prohibit any
party from reporting what it reasonably believes, after consultation with
outside counsel, to be violations of federal law or regulation to any
governmental authority pursuant to Section 21F of the Exchange Act or Rule 21F
promulgated thereunder.

 

6

 

 

5. No Litigation. Prior to the Termination Date, each party hereby covenants and
agrees that it shall not, and shall not permit any of its Representatives to,
directly or indirectly, alone or in concert with others, encourage, pursue or
assist any other person to threaten or initiate, any lawsuit, claim or
proceeding before any court (each, a “Legal Proceeding”) against the other party
or any of its Representatives, except for (a) any Legal Proceeding initiated
primarily to remedy a breach of or to enforce this Agreement and (b)
counterclaims with respect to any proceeding initiated by, or on behalf of one
party or its Affiliates against the other party or its Affiliates; provided,
however, that the foregoing shall not prevent any party or any of its
Representatives from responding to oral questions, interrogatories, requests for
information or documents, subpoenas, civil investigative demands or similar
processes (each, a “Legal Requirement”) in connection with any Legal Proceeding
if such Legal Proceeding has not been initiated by, on behalf of or at the
direct or indirect suggestion of such party or any of its Representatives;
provided, further, that in the event any party or any of its Representatives
receives such Legal Requirement, such party shall give prompt written notice of
such Legal Requirement to the other party (except where such notice would be
legally prohibited or not practicable). Each party represents and warrants that
neither it nor any assignee has filed any lawsuit against the other party.

 

6. Public Statements; SEC Filings.

 

(a) No later than two Business Days following the date of this Agreement, the
Company shall issue a press release (the “Press Release”) announcing this
Agreement, substantially in the form attached hereto as Exhibit D. Prior to the
issuance of the Press Release, neither the Company nor the members of the
Investor Group shall issue any press release or public announcement regarding
this Agreement or take any action that would require public disclosure thereof
without the prior written consent of the other party.

 

(b) No later than two Business Days following the date of this Agreement, the
Company shall file with the SEC a Current Report on Form 8-K reporting its entry
into this Agreement, disclosing applicable items to conform to its obligations
hereunder and appending this Agreement as an exhibit thereto (the “Form 8-K”).
The Form 8-K shall be consistent with the terms of this Agreement and the Press
Release. The Company shall provide the members of the Investor Group and their
Representatives with a reasonable opportunity to review and comment on the Form
8-K prior to the filing with the SEC and consider in good faith any comments of
the members of the Investor Group and their Representatives.

 

(c) No later than two Business Days following the date of this Agreement, the
Investor Group shall file with the SEC an amendment to its Schedule 13D in
compliance with Section 13 of the Exchange Act reporting its entry into this
Agreement, disclosing applicable items to conform to its obligations hereunder
and including the terms of this Agreement and the Reimbursement Agreement and
including this Agreement as an exhibit thereto (the “Schedule 13D Amendment”).
The Schedule 13D Amendment shall be consistent with the terms of this Agreement
and the Press Release. The Investor Group shall provide the Company and its
Representatives with a reasonable opportunity to review the Schedule 13D
Amendment prior to it being filed with the SEC and consider in good faith any
comments of the Company and its Representatives.

 

7

 

 

(d) Except for the issuance of the Press Release and the filing of the Form 8-K
and Schedule 13D Amendment, no party shall issue any press release or other
public statement (including, without limitation, in any filing required under
the Exchange Act) or speak with any member of the media about the subject matter
of this Agreement or the other party, except as required by law, Legal
Requirement or applicable stock exchange listing rules or with the prior written
consent of the other party and otherwise in accordance with this Agreement.

 

7.  Confidentiality.

 

(a) For so long as the Investor Group Designee is serving as a director on the
Board, the Investor Group and its Representatives may receive confidential
information of the Company from the Investor Group Designee which he learns in
his capacity as a director of the Company, including discussions or matters
considered in meetings of the Board or Board committees (collectively and
individually, “Confidential Information”); provided, however, that the Investor
Group and the Investor Group Designee shall have executed a confidentiality
agreement with the Company in the form attached hereto as Exhibit E (a
“Confidentiality Agreement”) prior to the receipt of Confidential Information by
the members of the Investor Group or their Representatives from the Investor
Group Designee; provided, further, that in the event that a Replacement Designee
is appointed to the Board pursuant to Section 1(j), the Investor Group and its
Representatives may not receive Confidential Information from such Replacement
Designee unless and until the Company, the Investor Group and such Replacement
Designee shall have executed an amendment or joinder to the Confidentiality
Agreement to join such Replacement Designee to the Confidentiality Agreement as
the Investor Group Director thereunder.

 

(b) For the avoidance of doubt, the parties acknowledge and agree that the
obligations of the Investor Group under this Section  7 and of the Investor
Group Designee under the Designee Agreement shall be in addition to, and not in
lieu of, the Investor Group Designee’s confidentiality obligations under
Delaware law and the Charter, By-Laws and applicable corporate governance
policies of the Company; provided, that in the event of a conflict between the
Investor Group Designee’s confidentiality obligations under the applicable
corporate governance policies of the Company and those in the Confidentiality
Agreement, the terms of the Confidentiality Agreement shall control.

 

8. Compliance with Securities Laws. The Investor Group acknowledges that it
understands its obligations under the U.S. securities laws. Subject to
compliance with such laws, the members of the Investor Group and their
Representatives shall in any event be free to trade or engage in such
transactions during periods when the members of the Board are permitted to do
so, and the Company will notify the members of the Investor Group reasonably in
advance when such “open window” director trading periods begin and end. The
Company acknowledges that none of the provisions herein shall in any way limit
the activities of the members of the Investor Group or their Representatives in
their respective ordinary course of businesses if such activities will not
violate applicable securities laws or the obligations specifically agreed to
under this Agreement. In addition, nothing contained in this Agreement shall
restrict the ability of the members of the Investor Group or their
Representatives from purchasing, selling or otherwise trading securities of the
Company pursuant to any Rule 10b5-1 trading plan adopted prior to the execution
of this Agreement.

 

8

 

 

9. Affiliates and Associates. Each party shall instruct its controlled
Affiliates and Associates to comply with the terms of this Agreement and shall
be responsible for any breach of this Agreement by any such controlled Affiliate
or Associate. A breach of this Agreement by a controlled Affiliate or Associate
of a party, if such controlled Affiliate or Associate is not a party to this
Agreement, shall be deemed to occur if such controlled Affiliate or Associate
engages in conduct that would constitute a breach of this Agreement if such
controlled Affiliate or Associate was a party to the same extent as a party to
this Agreement.

 

10.  Representations and Warranties.

 

(a) The Investor Group represents and warrants that it has full power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated hereby, and that this
Agreement has been duly and validly executed and delivered by it, constitutes a
valid and binding obligation and agreement of it and is enforceable against it
in accordance with its terms. The Investor Group represents that the execution
of this Agreement, the consummation of any of the transactions contemplated
hereby, and the fulfillment of the terms hereof, in each case in accordance with
the terms hereof, will not conflict with, or result in a breach or violation of
the organizational documents of it as currently in effect, the execution,
delivery and performance of this Agreement by it does not and will not violate
or conflict with (i) any law, rule, regulation, order, judgment or decree
applicable to it or (ii) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both could constitute
such a breach, violation or default) under or pursuant to, or result in the loss
of a material benefit under, or give any right of termination, amendment,
acceleration or cancellation of, any organizational document, agreement,
contract, commitment, understanding or arrangement to which it is a party or by
which it is bound. The Investor Group represents and warrants that, as of the
date of this Agreement, it beneficially owns an aggregate of 6,651,906 shares of
Common Stock. The Investor Group represents and warrants that it has voting
authority over such shares and owns no Synthetic Equity Interests or any Short
Interests in the Company.

 

(b) The Company hereby represents and warrants that it has the power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated hereby, and that this
Agreement has been duly and validly authorized, executed and delivered by the
Company, constitutes a valid and binding obligation and agreement of the Company
and is enforceable against the Company in accordance with its terms. The Company
represents that the execution of this Agreement, the consummation of any of the
transactions contemplated hereby, and the fulfillment of the terms hereof, in
each case in accordance with the terms hereof, will not conflict with, or result
in a breach or violation of the organizational documents of the Company as
currently in effect, the execution, delivery and performance of this Agreement
by the Company does not and will not violate or conflict with (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or (ii) result
in any breach or violation of or constitute a default (or an event which with
notice or lapse of time or both could constitute such a breach, violation or
default) under or pursuant to, or result in the loss of a material benefit
under, or give any right of termination, amendment, acceleration or cancellation
of, any organizational document, agreement, contract, commitment, understanding
or arrangement to which the Company is a party or by which it is bound.

 

9

 

 

11. Termination.

 

(a) Either party shall have the right to terminate this Agreement upon delivery
to the other party of advance written notice of such termination at least five
Business Days prior to the date of such termination (the effective date of
termination, the “Termination Date”); provided, however, that neither party
shall be permitted to terminate this Agreement until the date that is 30
calendar days prior to the notice deadline under the By-Laws for the nomination
of director candidates for election to the Board at the 2021 Annual Meeting;
provided, further, that the Company shall deliver irrevocable written notice to
the Investor Group if it intends to include the Investor Group Designee in its
slate of candidates for election to the Board and to comply with its obligations
under Section 1(e) with respect to the 2021 Annual Meeting and any subsequent
Annual Meeting at least 45 calendar days prior to the notice deadline under the
By-Laws for the nomination of director candidates for election to the Board at
such Annual Meeting, and, if the Investor Group or the Investor Group Designee
does not decline such renomination in writing by the date that is 30 calendar
days prior to the notice deadline under the By-Laws for the nomination of
director candidates for election to the Board at such Annual Meeting, then the
Investor Group shall not be permitted to terminate this Agreement pursuant to
this Section 11(a) until after the date of such Annual Meeting (for the
avoidance of doubt, nothing in this Section 11(a) shall require the Company to
nominate the Investor Group Designee for election to the Board at any Annual
Meeting occurring after the Termination Date); provided, further, that no party
shall be permitted to terminate this Agreement in any time period between the
notice deadline under the By-Laws for the nomination of director candidates for
election to the Board with respect to any Annual Meeting and the conclusion of
such Annual Meeting. Notwithstanding anything to the contrary in this Agreement:

 

(i) the obligations of the Investor Group pursuant to Sections 1, 2, 3, 4, 5 and
6(d) shall terminate in the event that the Company materially breaches its
obligations to the Investor Group pursuant to Sections 1, 4 or 5, or the
representations and warranties in Section 10(b) of this Agreement and such
breach (if capable of being cured) has not been cured within ten calendar days
following written notice of such breach from the Investor Group, or, if
impossible to cure within ten calendar days, the Company has not taken
substantive action to correct within ten calendar days following written notice
of such breach from the Investor Group; provided, however, that the obligations
of the Investor Group pursuant to Section 5 shall terminate immediately in the
event that the Company materially breaches its obligations to the Investor Group
under Section 5; and

 

10

 

 

(ii) the obligations of the Company to the Investor Group pursuant to
Sections 1, 4 and 5 shall terminate in the event that (A) the Investor Group
materially breaches its obligations in Sections 1, 2, 3, 4, 5, 6(d), 7 or 8 or
the representations and warranties in Section 10(a), or (B) the Investor Group
Designee materially breaches the Designee Agreement, and such breach (if capable
of being cured) has not been cured within ten calendar days following written
notice of such breach, or, if impossible to cure within ten calendar days, the
Investor Group Designee has not taken substantive action to correct within ten
calendar days following written notice of such breach from the Company;
provided, however, that the obligations of the Company to the Investor Group
pursuant to Section 5 shall terminate immediately in the event that the Investor
Group materially breaches its obligations under Section 5.

 

(b) If this Agreement is terminated in accordance with this Section 11, this
Agreement shall forthwith become null and void, but no termination shall relieve
either party from liability for any breach of this Agreement prior to such
termination.

 

12. Expenses. The Company shall reimburse the Investor Group for its reasonable,
documented out-of-pocket fees and expenses (including legal expenses) incurred
in connection with the subject matter of this Agreement, provided that such
reimbursement shall not exceed $750,000 in the aggregate.

 

13. Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (a) when delivered by hand, with
written confirmation of receipt; (b) upon sending if sent by electronic mail to
the electronic mail addresses below, with confirmation of receipt from the
receiving party by electronic mail; (c) one Business Day after being sent by a
nationally recognized overnight carrier to the addresses set forth below; or (d)
when actually delivered if sent by any other method that results in delivery,
with written confirmation of receipt:

 

If to the Company:

with mandatory copies (which shall not constitute notice) to:

    Knowles Corporation

1151 Maplewood Drive

Itasca, Illinois 60143

Attn: Thomas Jackson, General Counsel

Email: thomas.jackson@knowles.com

Sidley Austin LLP

787 Seventh Avenue

New York, NY 10019

Attn: Kai H. Liekefett

          Paul L. Choi

Email: kliekefett@sidley.com

           pchoi@sidley.com

   

If to the Investor Group:

with mandatory copies (which shall not constitute notice) to:

   

Caligan

520 Madison Avenue

New York, NY 10022

Attn: David E. Johnson

Email: dj@caliganpartners.com

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Attn: Eleazer Klein

Email: eleazer.klein@srz.com

   

Falcon Edge

660 Madison Avenue, 19th Floor

New York, NY 10065

Attn: Mark Cho

Email: mcho@falconedge.com

 

 

11

 

 

14. Governing Law; Jurisdiction; Jury Waiver. This Agreement, and any disputes
arising out of or related to this Agreement (whether for breach of contract,
tortious conduct or otherwise), shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to its
conflict of laws principles. The parties agree that exclusive jurisdiction and
venue for any Legal Proceeding arising out of or related to this Agreement shall
exclusively lie in the Court of Chancery of the State of Delaware or, if such
Court does not have subject matter jurisdiction, the Superior Court of the State
of Delaware or, if jurisdiction is vested exclusively in the Federal courts of
the United States, the Federal courts of the United States sitting in the State
of Delaware, and any appellate court from any such state or Federal court. Each
party waives any objection it may now or hereafter have to the laying of venue
of any such Legal Proceeding, and irrevocably submits to personal jurisdiction
in any such court in any such Legal Proceeding and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any court that
any such Legal Proceeding brought in any such court has been brought in any
inconvenient forum. Each party consents to accept service of process in any such
Legal Proceeding by service of a copy thereof upon either its registered agent
in the State of Delaware or the Secretary of State of the State of Delaware,
with a copy delivered to it by certified or registered mail, postage prepaid,
return receipt requested, addressed to it at the address set forth in
Section 13. Nothing contained herein shall be deemed to affect the right of any
party to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT.

 

15. Specific Performance. Each party to this Agreement acknowledge and agree
that the other party would be irreparably injured by an actual breach of this
Agreement by the first-mentioned party or its Representatives and that monetary
remedies may be inadequate to protect either party against any actual or
threatened breach or continuation of any breach of this Agreement. Without
prejudice to any other rights and remedies otherwise available to the parties
under this Agreement, each party shall be entitled to equitable relief by way of
injunction or otherwise and specific performance of the provisions hereof upon
satisfying the requirements to obtain such relief without the necessity of
posting a bond or other security, if the other party or any of its
Representatives breach or threaten to breach any provision of this Agreement.
Such remedy shall not be deemed to be the exclusive remedy for a breach of this
Agreement, but shall be in addition to all other remedies available at law or
equity to the non-breaching party.

 

12

 

 

16. Certain Definitions and Interpretations. As used in this Agreement: (a) the
terms “Affiliate” and “Associate” (and any plurals thereof) have the meanings
ascribed to such terms under Rule 12b-2 promulgated by the SEC under the
Exchange Act and shall include all persons or entities that at any time prior to
the Termination Date become Affiliates or Associates of any applicable person or
entity referred to in this Agreement; provided, however, that the term
“Associate” shall refer only to Associates controlled by the Company or the
members of the Investor Group, as applicable; provided, further, that, for
purposes of this Agreement, the members of the Investor Group shall not be
Affiliates or Associates of the Company and the Company shall not be an
Affiliate or Associate of the members of the Investor Group; (b) the
term “Annual Meeting” means each annual meeting of stockholders of the Company
and any adjournment, postponement, rescheduling or continuation thereof; (c) the
terms “beneficial ownership,” “group,” “participant,” “person,” “proxy” and
“solicitation” (and any plurals thereof) have the meanings ascribed to such
terms under the Exchange Act and the rules and regulations promulgated
thereunder, provided, that the meaning of “solicitation” shall be without regard
to the exclusions set forth in Rules 14a-1(l)(2)(iv) and 14a-2 under the
Exchange Act; (d) the term “Business Day” means any day that is not a Saturday,
Sunday or other day on which commercial banks in the State of New York are
authorized or obligated to be closed by applicable law; (e) the term “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder; (f) the term “Extraordinary Transaction”
means any tender offer, exchange offer, merger, consolidation, acquisition,
business combination, sale, recapitalization, restructuring, or other
transaction with a third party that, in each case, that results in a change in
control of the Company or the sale of substantially all of its assets; (g) the
term “Independent Director” means an individual that (i) qualifies as an
“independent director” under applicable rules of the SEC, the rules of any stock
exchange on which the Company is traded and applicable governance policies of
the Company and (ii) is not an employee, principal, Affiliate or Associate of
the members of the Investor Group or any of their Affiliates or Associates; (h)
the term “Net Long Position” means such shares of Common Stock beneficially
owned, directly or indirectly, that constitute such person’s net long position
as defined in Rule 14e-4 under the Exchange Act mutatis mutandis, provided that
“Net Long Position” shall not include any shares as to which such person does
not have the right to vote or direct the vote other than as a result of being in
a margin account, or as to which such person has entered into a derivative or
other agreement, arrangement or understanding that hedges or transfers, in whole
or in part, directly or indirectly, any of the economic consequences of
ownership of such shares; and the terms “person” or “persons,” for purposes of
the meaning of the term “Net Long Position,” shall mean any individual,
corporation (including not-for-profit), general or limited partnership, limited
liability or unlimited liability company, joint venture, estate, trust,
associate, organization or other entity of any kind or nature; (i) the term
“Representatives” means (i) a person’s Affiliates and Associates and (ii) its
and their respective directors, officers, employees, partners, members,
managers, consultants, legal or other advisors, agents and other representatives
acting in a capacity on behalf of, in concert with or at the direction of such
person or its Affiliates or Associates; (j) the term “SEC” means the U.S.
Securities and Exchange Commission; (k) the term “Short Interests” means any
agreement, arrangement, understanding or relationship, including any repurchase
or similar so-called “stock borrowing” agreement or arrangement, engaged in,
directly or indirectly, by such person, the purpose or effect of which is to
mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares
of any class or series of the Company’s equity securities by, manage the risk of
share price changes for, or increase or decrease the voting power of, such
person with respect to the shares of any class or series of the Company’s equity
securities, or that provides, directly or indirectly, the opportunity to profit
from any decrease in the price or value of the shares of any class or series of
the Company’s equity securities; (l) the term “Stockholder Meeting” means each
annual or special meeting of stockholders of the Company, or any action by
written consent of the Company’s stockholders in lieu thereof, and any
adjournment, postponement, rescheduling or continuation thereof; (m) the term
“Synthetic Equity Interests” means any derivative, swap or other transaction or
series of transactions engaged in, directly or indirectly, by such person, the
purpose or effect of which is to give such person economic risk similar to
ownership of equity securities of any class or series of the Company, including
due to the fact that the value of such derivative, swap or other transactions
are determined by reference to the price, value or volatility of any shares of
any class or series of the Company’s equity securities, or which derivative,
swap or other transactions provide the opportunity to profit from any increase
in the price or value of shares of any class or series of the Company’s equity
securities, without regard to whether (i) the derivative, swap or other
transactions convey any voting rights in such equity securities to such person;
(ii) the derivative, swap or other transactions are required to be, or are
capable of being, settled through delivery of such equity securities; or (iii)
such person may have entered into other transactions that hedge or mitigate the
economic effect of such derivative, swap or other transactions; and (n) the term
“Third Party” refers to any person that is not a party, a member of the Board, a
director or officer of the Company, or legal counsel to either party. In this
Agreement, unless a clear contrary intention appears, (i) the word “including”
(in its various forms) means “including, without limitation;” (ii) the words
“hereunder,” “hereof,” “hereto” and words of similar import are references in
this Agreement as a whole and not to any particular provision of this Agreement;
(iii) the word “or” is not exclusive; (iv) references to “Sections” in this
Agreement are references to Sections of this Agreement unless otherwise
indicated; and (v) whenever the context requires, the masculine gender shall
include the feminine and neuter genders.

 

13

 

 

17.  Miscellaneous.

 

(a) This Agreement, including all exhibits hereto, with the exception of the
Confidentiality Agreement, contains the entire agreement between the parties and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.

 

(b) This Agreement is solely for the benefit of the parties and is not
enforceable by any other persons.

 

(c) This Agreement shall not be assignable by operation of law or otherwise by a
party without the consent of the other party. Any purported assignment without
such consent is void ab initio. Subject to the foregoing sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
and against the permitted successors and assigns of each party.

 

(d) Neither the failure nor any delay by a party in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.

 

(e) If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. It is hereby stipulated and declared to be the intention of the
parties that the parties would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which may be hereafter
declared invalid, void or unenforceable. In addition, the parties agree to use
their reasonable best efforts to agree upon and substitute a valid and
enforceable term, provision, covenant or restriction for any of such that is
held invalid, void or unenforceable by a court of competent jurisdiction.

 

14

 

 

(f) Any amendment or modification of the terms and conditions set forth herein
or any waiver of such terms and conditions must be agreed to in a writing signed
by each party.

 

(g) This Agreement may be executed in one or more textually identical
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. Signatures to this
Agreement transmitted by facsimile transmission, by electronic mail in “portable
document format” (“.pdf”) form, or by any other electronic means intended to
preserve the original graphic and pictorial appearance of a document, shall have
the same effect as physical delivery of the paper document bearing the original
signature.

 

(h) Each of the parties acknowledges that it has been represented by counsel of
its choice throughout all negotiations that have preceded the execution of this
Agreement, and that it has executed this Agreement with the advice of such
counsel. Each party and its counsel cooperated and participated in the drafting
and preparation of this Agreement, and any and all drafts relating thereto
exchanged among the parties will be deemed the work product of all of the
parties and may not be construed against any party by reason of its drafting or
preparation. Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this Agreement against any party
that drafted or prepared it is of no application and is hereby expressly waived
by each of the parties, and any controversy over interpretations of this
Agreement will be decided without regard to events of drafting or preparation.

 

(i) The headings set forth in this Agreement are for convenience of reference
purposes only and will not affect or be deemed to affect in any way the meaning
or interpretation of this Agreement or any term or provision of this Agreement

 

[Signature Pages Follow]

 

15

 

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, or caused
the same to be executed by its duly authorized representative, as of the date
first above written.

 

  THE COMPANY:         KNOWLES CORPORATION         By: /s/ Jeffrey S. Niew  
Name: Jeffrey S. Niew   Title: President and Chief Executive Officer

 

Signature Page to Settlement Agreement

 

 

 

  INVESTOR GROUP:      

CALIGAN PARTNERS LP

     

By:

/s/ Samuel J. Merksamer   Name: Samuel J. Merksamer   Title: Partner        

CALIGAN PARTNERS CV I LP

     

By: Caligan Partners LP, its investment manager

   

By:

/s/ Samuel J. Merksamer    Name: Samuel J. Merksamer   Title: Partner        

CALIGAN PARTNERS CV GP LLC

     

By:

/s/ Samuel J. Merksamer   Name: Samuel J. Merksamer   Title: Managing Member    
 

CALIGAN PARTNERS GP, LLC

     

By:

/s/ Samuel J. Merksamer   Name: Samuel J. Merksamer   Title: Managing Member    
   

FALCON EDGE CAPITAL, LP

     

By:

/s/ Mark Cho   Name: Mark Cho   Title: Authorized Signatory        

FALCON EDGE (CAYMAN) GP, LTD.

     

By:

/s/ Mark Cho  

Name:

Mark Cho   Title: Authorized Signatory

 

Signature Page to Settlement Agreement

 

 

 

 

FALCON EDGE GLOBAL MASTER FUND, LP

     

By: Falcon Edge Capital LP, its investment manager

   

By:

/s/ Mark Cho  

Name:

 Mark Cho

  Title:  Authorized Signatory        

MORAINE MASTER FUND, LP

     

By: Falcon Edge Capital LP, its investment manager

     

By:

/s/ Mark Cho   Name:

 Mark Cho

 

Title:

 Authorized Signatory        

PATRIOT GLOBAL MANAGEMENT, LP

     

By:

/s/ Jonathan Christodoro   Name:  Jonathan Christodoro   Title:  Authorized
Signatory        

SAMUEL J. MERKSAMER

 

/s/ Samuel J. Merksamer        

DAVID E. JOHNSON

        /s/ David E. Johnson         JONATHAN CHRISTODORO         /s/ Jonathan
Christodoro      

 

Signature Page to Settlement Agreement

 

 

 

Exhibit A

 

Form of Nomination Withdrawal

 

 

 

CALIGAN PARTNERS CV I LP

c/o Caligan Partners LP
520 Madison Avenue
New York, New York 10022

 

[●], 2019

Knowles Corporation

1151 Maplewood Drive

Itasca, Illinois 60143

Attn: Thomas Jackson, General Counsel

 

Re:Withdrawal of Stockholder Notice of Intent to Nominate Persons for Election
as Directors at the 2019 Annual Meeting of Stockholders of Knowles Corporation

 

Dear Mr. Jackson:

 

Caligan Partners CV I LP, a Cayman Islands exempted limited partnership (the
“Record Holder”), submitted notice of its intent to nominate persons for
election as directors at the 2019 annual meeting of stockholders of Knowles
Corporation, a Delaware corporation (the “Company”) by letter dated January 30,
2019, as updated and supplemented by letter dated March 11, 2019 (collectively,
the “Notice”).

 

The purpose of this letter is to provide the Company with notice of the Record
Holder’s withdrawal of the Notice and the proposed nominations of Samuel J.
Merksamer and Jonathan Christodoro, effective immediately upon the execution of
a definitive settlement agreement among the Company, Caligan Partners LP and
Falcon Edge Capital, LP and other related parties.

 

  Very truly yours,         CALIGAN PARTNERS CV I LP         By: Caligan
Partners LP, its investment manager         By:       Name: Samuel J. Merksamer
    Title: Partner

 

 

 

Exhibit B

 

Form of Designee Agreement

 

 

 

[●], 20[●]

 

Board of Directors
Knowles Corporation
1151 Maplewood Drive

 

Itasca, Illinois 60143

 

Re: Designee Agreement

 

Ladies and Gentlemen:

 

Reference is made to that certain Settlement Agreement (the “Agreement”), dated
as of May 9, 2019, by and among Knowles Corporation, a Delaware corporation (the
“Company”), on the one hand, and Caligan Partners CV I LP, a Cayman Islands
exempted limited partnership (“Caligan CV I”), Caligan Partners LP, a Delaware
limited partnership (“Caligan”), Caligan Partners CV GP LLC, a Delaware limited
liability company, Caligan Partners GP, LLC, a Delaware limited liability
company, Falcon Edge Capital, LP, a Delaware limited partnership (“Falcon
Edge”), Falcon Edge (Cayman) GP, Ltd., a Cayman Islands corporation, Falcon Edge
Global Master Fund, LP, a Cayman Islands exempted limited partnership, Moraine
Master Fund, LP, a Cayman Islands exempted limited partnership, Patriot Global
Management, LP, a Delaware limited partnership, Samuel J. Merksamer, an
individual, David E. Johnson, an individual, and Jonathan Christodoro, an
individual (the foregoing, together with Caligan CV I, and collectively with
each of their respective Affiliates, the “Investor Group”), on the other hand.
Capitalized terms used herein but not defined shall have the meaning set forth
in the Agreement.

 

1.If appointed or elected as a director of the Company, I hereby irrevocably
offer to resign from my position as a director of the Board and from any and all
committees of the Board on which I serve, subject to acceptance by the Board,
effective immediately upon the Board’s notice to me that it has accepted such
offer of resignation, which the Board may give within 30 business days after the
Board or the chairman thereof obtains actual knowledge of any of the following:
(a) the Termination Date; (b) such time as the Investor Group’s Net Long
Position falls below the Ownership Minimum; (c) a material breach of the
Agreement by the Investor Group that terminates the Company’s obligations to the
Investor Group pursuant to Section 11(a)(ii) of the Agreement; (d) my material
breach of this letter agreement; or (e) a material inaccuracy in any director
questionnaire that I have submitted to the Company.

 

2.If elected as a director of the Company, I agree to comply with the terms of
the Company’s Certificate of Incorporation (as amended and as may be further
amended from time to time), By-Laws (as amended and as may be further amended
from time to time), committee charters, corporate governance, ethics, conflict
of interest, confidentiality, stock ownership and trading policies and
guidelines and similar governance documents that are generally applicable to the
Company’s directors; provided, that in the event of a conflict between this
letter agreement and the terms of the Confidentiality Agreement, the terms of
the Confidentiality Agreement shall control; and provided, further, that the
Reimbursement Agreement, dated as of May 9, 2019, by and among Caligan and
Falcon Edge, on the one hand, and me, on the other hand, and its terms, in the
form executed by the parties thereto and provided to the Company prior to the
execution and delivery hereof, shall not be deemed to constitute a breach or
violation of this paragraph 2.

1

 

 

3.I agree that, during the term of the Agreement, the Board or any committee
thereof, in the exercise of its fiduciary duties, may recuse me from any portion
of a Board or committee meeting, and restrict my access to information of the
Company, to the extent relating to (a) the Agreement, including the
interpretation and enforcement thereof, (b) any demand made by any member of the
Investor Group or any of their respective Affiliates if such demand is coupled,
expressly or implied, with the threat to take any of the actions prohibited in
Sections 3(a) through 3(l) of the Agreement, (c) this letter agreement, (d) my
failure to comply with the Charter, the By-Laws or policies that are applicable
to all directors or (e) any proposed transaction between the Company and any
member of the Investor Group or any of their respective Affiliates. I further
agree that, during the term of the Agreement, (i) consistent with my fiduciary
duties as a director of the Company, I shall consider in good faith, to the same
extent as any other director of the Company, recusal from any Board or committee
meeting in the event there is any other actual or potential conflict of interest
between the Investor Group or myself, on the one hand, and the Company, on the
other hand; and (ii) the Board may restrict my access to information of the
Company to the same extent it would for any other director of the Company, in
accordance with applicable law.

 

4.I agree that, during the term of the Agreement, there shall be no contracts,
plans or arrangements, written or otherwise, in effect during the term of the
Agreement, between any members of the Investor Group and myself, providing for
any compensation, reimbursement of expenses or indemnification of me in
connection with or related to my service on the Board, other than the
Reimbursement Agreement.

 

5.Each party hereto acknowledges and agrees that, for so long as I am serving as
a director on the Board, I may provide Confidential Information to the members
of the Investor Group and their Representatives; provided, however, that the
Investor Group and I shall have executed a Confidentiality Agreement with the
Company prior to any provision of Confidential Information to the members of the
Investor Group or their Representatives by me. For the avoidance of doubt, each
party hereto further acknowledges and agrees that the obligations under this
letter agreement shall be in addition to, and not in lieu of, my confidentiality
obligations under Delaware law and the Charter, By-Laws and applicable corporate
governance policies of the Company; provided, however that in the event of a
conflict between my confidentiality obligations under the committee charters,
corporate governance, confidentiality, and similar governance documents and
governance policies of the Company and those in the Confidentiality Agreement,
the terms of the Confidentiality Agreement shall control.

 

6.The Company shall provide me with the same compensation, including without
limitation restricted stock units, shares of capital stock, and other equity
equivalents, and including any initial stock grant and all subsequent stock
grants, on the same terms and subject to the same conditions, as is provided to
(a) any other member of the Board (other than the chairman) in consideration for
such member’s service as such, and (b) any member of any Board committee of
which I am or may become a member. The Company shall reimburse my expenses
incurred in connection with or related to my service on the Board on the same
terms and subject to the same conditions and policies as are applicable to Board
members generally.

 

7.This letter agreement, and any disputes arising out of or related to this
letter agreement (whether for breach of contract, tortious conduct or
otherwise), shall be governed by, and construed in accordance with, the laws of
the State of Delaware, without giving effect to its conflict of laws principles.

 

8.Each party hereto acknowledges and agrees that the other party would be
irreparably injured by an actual breach of this letter agreement by the
first-mentioned party and that monetary remedies may be inadequate to protect
either party against any actual or threatened breach or continuation of any
breach of this letter agreement. Without prejudice to any other rights and
remedies otherwise available to the parties under this letter agreement, each
party shall be entitled to equitable relief by way of injunction or otherwise
and specific performance of the provisions hereof upon satisfying the
requirements to obtain such relief without the necessity of posting a bond or
other security, if the other party breaches or threaten to breach any provision
of this letter agreement. The parties agree that specific performance shall be
the sole and specific remedy for a breach of this letter agreement; provided
that in the event of litigation relating to this letter agreement, if a court of
competent jurisdiction determines that a party has breached this letter
agreement, then such breaching party shall be liable for, and shall pay, the
reasonable legal fees, costs and expenses that the non-breaching party has
incurred in connection with such litigation, including any appeal therefrom;
provided, further, that in the event of litigation related to this letter
agreement, if a court of competent jurisdiction does not make a determination
that a party has breached this letter agreement, then the party who claimed that
such breach occurred shall be liable for, and shall pay, the reasonable legal
fees, costs and expenses that the other party has incurred in connection with
such litigation, including any appeal therefrom. For the avoidance of doubt,
nothing in this letter agreement is intended to limit remedies available against
any party for a breach of applicable law or regulation by such party.

 

9.Neither the failure nor any delay by a party in exercising any right, power or
privilege under this letter agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.

 

2

 

 

10.This letter agreement and the obligations hereunder shall terminate on the
date that I am no longer a director of the Board, without affecting any rights,
remedies or obligations arising or accruing prior to such date.

 

11.If any term, provision, covenant or restriction of this letter agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
letter agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties hereto that the parties would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, void or unenforceable. In
addition, the parties agree to use their reasonable best efforts to agree upon
and substitute a valid and enforceable term, provision, covenant or restriction
for any of such that is held invalid, void or unenforceable by a court of
competent jurisdiction.

 

[Remainder of page intentionally left blank]

 

3

 

 

  Very Truly Yours,           Name:   Address:

 

Accepted and Agreed by:       KNOWLES CORPORATION           By:   Title:  

 

 

 

SIGNATURE PAGE TO DESIGNEE AGREEMENT

 

 

 

Exhibit C

 

Form of Reimbursement Agreement

 

 

 

EXECUTION VERSION

 

REIMBURSEMENT AGREEMENT

 

1. This Reimbursement Agreement (the “Agreement”), dated May [●], 2019, is by
and among Caligan Partners, L.P. (“Caligan”), Falcon Edge Capital LP (“Falcon
Edge,” and together with Caligan, the “Investor Group,” “we” or “us”), on the
one hand, and Steven F. Mayer (“you”), on the other hand.

 

2. In connection with the settlement agreement by and among the Knowles
Corporation (“Knowles” or the “Company”), the Investor Group, and the other
parties thereto (the “Settlement Agreement”), the confidentiality agreement
between Knowles Corporation and the Investor Group (the “Confidentiality
Agreement”) and your appointment to the Board of Directors of the Company (the
“Board”) as an independent director, in the event that you incur any reasonable
documented expenses, including without limitation travel expenses, in connection
with your service in such capacity prior to the Termination Date (as defined in
the Settlement Agreement), including without limitation in connection with your
provision of confidential information to us pursuant to the terms of the
Settlement Agreement, and whether such expenses are incurred prior to or after
the execution and delivery of this Agreement, we jointly and severally agree to
reimburse you for such expenses, promptly upon submission of such documentation
to us, to the extent not reimbursed by the Company.

 

3. In the event that (i) you are required by the Company to resign from the
Board pursuant to the Settlement Agreement other than (a) as a result of your
material breach of an obligation to the Company binding on you, or (b) as a
result of a material misrepresentation or omission in your director
questionnaire, and the Board accepts such resignation, or (ii) your board
membership terminates for any other reason, other than (c) as a result of your
death, disability or incapacity, or (d) as a result of your voluntary
resignation (it being understood that the fact that you have signed and
delivered to the Company an undated resignation letter, which the Company may
thereafter accept, does not in and of itself constitute any resignation as being
voluntary), and as a result of any such accepted resignation or termination
(other than as provided in clauses (a) through (d) above) any awarded but
unvested shares of common stock of the Company, par value $0.01 per share, or
any related restricted stock units or similar equity-based compensation, are
forfeited or will not vest, then we jointly and severally agree to reimburse you
an amount equal to the value of such awarded but unvested shares, units or
compensation (based on the average closing price of the common stock on the
previous five trading days prior to such resignation or termination).

 

 

 

4. The Investor Group, jointly and severally, agrees that, in the event and to
the extent that indemnification is not available, or claimed to be not
available, to you under the Company’s Amended and Restated Certificate of
Incorporation, as amended, the Company’s Amended and Restated Bylaws, or the
Company’s director & officer insurance policy, and/or in the event and to the
extent that any such indemnification is not sufficient to hold you harmless, the
Investor Group will, jointly and severally, indemnify and hold you harmless from
and against any and all losses, liabilities, claims, actions, threatened
actions, judgments, and reasonable costs, expenses, and disbursements (including
without limitation reasonable attorneys’ fees and expenses) (“Losses”) incurred
by you in connection with or arising out of your nomination by us as a member of
the Board, your service on the Board, your provision of confidential information
to us pursuant to the terms of the Settlement Agreement, the other matters
contemplated by this Agreement, your enforcement of your claim or right to
indemnification or to advances of expenses as a director in connection with your
service as a director prior to the Termination Date (as defined in the
Settlement Agreement), or your enforcement of this Agreement; provided, however,
that the aggregate amount of indemnification available under this paragraph
shall not exceed $5,000,000, and the Investor Group shall not be liable for any
Losses in excess of such amount (in the aggregate). Your right of
indemnification hereunder shall continue after the Termination Date has taken
place, but only for acts, omissions, or circumstances that occurred, or claims
based on matters arising or alleged to have arisen, prior to the Termination
Date. Your right of indemnification will not apply to the extent the Losses are
otherwise paid under any directors and officers or other insurance policy that
may separately provide coverage to you as a director of the Company or
otherwise. Nothing herein shall be construed to provide you with indemnification
against Losses to the extent that such Losses were caused by (i) a material
breach or violation by you of the Settlement Agreement or the Governance
Compliance Agreement (as defined in the Settlement Agreement); (ii) your
violation of any provision of state or federal law, unless you demonstrate that
your action was taken in good faith; or (iii) actions or omissions by you that
constitute bad faith, gross negligence or willful misconduct. You shall promptly
notify the Investor Group in writing in the event of any claims for which you
seek indemnification hereunder, and thereafter the Investor Group shall advance
to you your reasonable legal fees and expenses in connection therewith to the
extent that no such advances have been received by you from the Company or any
insurer related thereto, provided that the Investor Group may require, as a
condition to such advances, that you execute an undertaking to repay such
advances if it is ultimately determined, in a final and binding judicial
decision, that you were not entitled to the indemnification to which such
advances related. The Investor Group’s indemnification obligations will be
deemed (as between the Investor Group and the Company) secondary to any
insurance or indemnification provided by the Company to its directors, and (to
the extent that the Company’s director indemnification policies and insurance
coverage would cover the Losses in question in the absence of this Agreement)
the Company will be deemed for all purposes to be the primary obligor with
respect to any and all such Losses sustained for which the Investor Group
otherwise would be required to indemnify you pursuant to this paragraph 4.

 

5. Each of us recognizes that should you be elected or appointed to the Board
all of your activities and decisions as a director will be governed by
applicable law and subject to your fiduciary duties, as applicable, to the
Company and to the stockholders of the Company and, as a result, that there is,
and can be, no agreement between you and the Investor Group that governs the
decisions which you will make as a director of the Company.

 

6. We hereby jointly and severally represent and warrant that attached hereto
are true and correct copies of the Settlement Agreement, the Confidentiality
Agreement, and the Governance Compliance Agreement.

 

7. This Agreement shall automatically terminate on the earliest to occur of (i)
the Termination Date and (ii) the date you cease to serve as a member of the
Board; provided, however, that the third, fourth, eighth, ninth and tenth
paragraphs of this Agreement shall survive such termination; and provided,
further, that no termination of this Agreement shall affect any rights or
obligations of the parties arising or accrued prior to such termination.

 

 

 

8. This Agreement may be executed in counterparts with the same effect as though
all parties had signed the same document. All counterparts shall be construed
together and shall constitute one agreement. A signed pdf, fax or photocopy of
this Agreement shall be as valid as an original.

 

9. This Agreement sets forth the entire agreement between the Investor Group and
you as to the subject matter contained herein, and cannot be amended, modified
or terminated except by a writing executed by each member of the Investor Group
and you.

 

10. This Agreement shall be governed by the laws of the State of New York,
without regard to the principles of the conflicts of laws thereof. The parties
agree to the exclusive jurisdiction of the state and federal courts of New York,
New York, and waive, and agree not to plead or to make, any claim that any
action or proceeding brought in the state and federal courts of New York, New
York has been brought in an improper or inconvenient forum.

 

[Signature Page Follows]

 

 

 

Agreed to as of the date first set forth above:

 

THE INVESTOR GROUP:         CALIGAN PARTNERS, L.P.         By:           
Name:  Samuel Merksamer   Title:  Partner         FALCON EDGE CAPITAL, LP      
  By:     Name:  Mark Cho   Title:  Authorized Signatory         STEVEN F.
MAYER:             Name:  Steven F. Mayer  

 

 

 

 

Exhibit D

 

Form of Press Release

 

 

  

FOR IMMEDIATE RELEASE

 

Knowles Announces Agreement with Caligan Partners, Falcon Edge Capital and
Patriot Global Management; Steven F. Mayer Added to Board of Directors

 

Knowles to Host Analyst Day in the Fall of 2019

 

ITASCA, Ill.—May [●], 2019— Knowles Corporation (NYSE: KN), a market leader and
global provider of advanced micro-acoustic, audio processing and precision
device solutions, today announced that it has entered into a Settlement
Agreement with Caligan Partners, LP, Falcon Edge Capital, LP and Patriot Global
Management, LP (the “Group”). As part of this agreement, the Board of Directors
will add Steven F. Mayer to the Knowles Board effective immediately. Mr. Mayer
will also stand for election at the 2019 Annual Meeting. Mr. Mayer's appointment
will expand the Knowles Board to 10 directors, nine of whom are independent and
five of whom will have been appointed in the last four years.

 

In addition, the Governance and Nominating Committee of the Knowles Board and
the Group will search for an additional mutually agreed upon independent
director to be identified next year. Furthermore, following approval at the 2018
Annual Meeting of Shareholders, the Knowles Board will continue its process of
phased declassification beginning at the 2019 Annual Meeting and concluding at
the 2021 Annual Meeting of Shareholders, after which the entire Board will stand
for election annually. The Knowles Board also continues to unanimously recommend
that shareholders vote in favor of proposals at the 2019 Annual Meeting to
eliminate the supermajority vote requirements for amending the Company’s
governance documents.

 

“The Knowles Board is committed to best-in-class governance and we are pleased
to add Steve as a new independent director along with our other experienced and
highly qualified nominees,” said Donald Macleod, Chairman of the Knowles Board.
“We look forward to working together to drive sustainable growth and enhance
value for all Knowles shareholders.”

 

“Knowles is the market leader in micro-acoustic components and high-reliability
ceramic capacitors and filters, with a rich history of innovation. We look
forward to working constructively with Steve and the Knowles Board to help the
Company achieve its substantial potential,” said a spokesperson for the Group.

 

Knowles has entered into an agreement with the Group under which the Group has
agreed to withdraw its slate of director nominees and vote all of its shares in
support of Knowles’ full slate of directors at the Company’s 2019 Annual
Meeting. Additionally, the Group has agreed to customary standstill and other
provisions. The full agreement will be filed on Form 8-K with the U.S.
Securities and Exchange Commission (SEC).

 

Knowles plans to file with the SEC a supplement to its definitive proxy
statement, accompanied by a revised WHITE proxy card on which Knowles
shareholders can vote to elect the Company’s four director nominees, including
Mr. Mayer. Knowles shareholders who previously voted may change their vote by
executing a WHITE proxy card or by voting by telephone or through the Internet
by following the instructions shown on the WHITE proxy card. Only the latest
dated proxy submitted will be counted.

 

J.P. Morgan is serving as Knowles’ financial advisor and Sidley Austin LLP is
serving as the Company’s legal advisor. Schulte, Roth & Zabel is representing
the Group.

 

2019 Analyst Day

 

Knowles also announced today that it plans to host an Analyst Day in the fall of
2019. Specific details will be provided at a later date.

 

 

 

About Steven F. Mayer

 

Steven Mayer is the Chief Executive Officer of Iron Horse Acquisition Corp. and
Dedication Capital, LLC, privately held investment vehicles. From 2002 until
2018, he held a variety of senior positions with Cerberus Capital Management,
L.P. and Cerberus California, LLC, affiliated private investment firms, most
recently serving as Senior Managing Director, Co-Head of Global Private Equity,
and Chairman of the Cerberus Investment Committee.

 

Previously, Mr. Mayer was an executive managing director of Gores Technology
Group, a private equity investment firm that acquires controlling interests in
and manages underperforming and non-core technology and telecommunications
companies. Prior to joining Gores, Mr. Mayer served as a managing director of
Libra Capital Partners, L.P. and Aries Capital Group, LLC, and was a principal
with Apollo Advisors, L.P. and Lion Advisors, L.P., affiliated private equity
investment firms. Prior to that time, Mr. Mayer was an attorney with Sullivan &
Cromwell specializing in mergers, acquisitions, divestitures, leveraged buyouts
and corporate finance.

 

Mr. Mayer has served as a member of the board of directors or equivalent body of
a large number of companies in a wide variety of industries in the United States
and Europe, and is currently a member of the Board of Directors of Grifols, S.A.
and the Board of Supervisors of Syntellix AG.

 

Mr. Mayer holds a Bachelor in Arts from Princeton University and a Degree in Law
(JD, Juris Doctor) from Harvard Law School.

 

About Knowles:

 

Knowles Corporation (NYSE: KN) is a market leader and global provider of
advanced micro-acoustic, audio processing, and precision device solutions,
serving the mobile consumer electronics, communications, medical, defense,
automotive, and industrial markets. Knowles uses its leading position in MEMS
(micro-electro-mechanical systems) microphones and strong capabilities in audio
processing technologies to optimize audio systems and improve the user
experience in mobile, ear, and IoT applications. Knowles is also the leader in
acoustic components, high-end capacitors, and mmWave RF solutions for a diverse
set of markets. Knowles’ focus on the customer, combined with unique technology,
proprietary manufacturing techniques, rigorous testing, and global scale,
enables it to deliver innovative solutions that optimize the user experience.
Founded in 1946 and headquartered in Itasca, Illinois, Knowles is a global
organization with employees in 11 countries. The company was spun out from Dover
Corporation in 2014 and has been focused on reshaping its business portfolio and
investing in high value solutions to diversify its revenue and increase exposure
to high-growth markets. For more information, visit knowles.com.

 

Forward Looking Statements

 

This news release contains forward-looking statements within the meaning of the
safe harbor provisions of the United States Private Securities Litigation Reform
Act of 1995. The words “believe,” “expect,” “anticipate,” “project,” “estimate,”
“budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,”
“seek,” “should,” “will,” “would,” “objective,” “forecast,” “goal,” “guidance,”
“outlook,” “effort,” “target,” and similar expressions, among others, generally
identify forward-looking statements, which speak only as of the date the
statements were made. The statements in this news release are based on currently
available information and the current expectations, forecasts, and assumptions
of Knowles' management concerning risks and uncertainties that could cause
actual outcomes or results to differ materially from those outcomes or results
that are projected, anticipated, or implied in these statements. These risks and
uncertainties include, but are not limited to: unforeseen changes in MEMS
microphone demand from our largest customers, in particular, two North American,
a Korean, and Chinese OEM customers; the success and rate of multi-microphone
and smart microphone adoption and proliferation of our “intelligent audio”
solutions, including our audio edge processors, to high volume platforms; our
ongoing ability to execute our strategy to diversify our end markets and
customers; our ability to stem or overcome price erosion in our segments;
fluctuations in our stock's market price; fluctuations in operating results and
cash flows; our ability to prevent or identify quality issues in our products or
to promptly remedy any such issues that are identified; the timing of OEM
product launches; risks associated with increasing our inventories in advance of
anticipated orders by customers; macroeconomic conditions, both in the U.S. and
internationally; the impact of changes to laws and regulations that affect the
Company’s ability to offer products or services to customers in different
regions; risks associated with shareholder activism, including proxy contests;
our ability to achieve continued reductions in our operating expenses; our
ability to obtain, enforce, defend or monetize our intellectual property rights;
increases in the costs of critical raw materials and components; availability of
raw materials and components; managing new product ramps and introductions for
our customers; our dependence on a limited number of large customers; our
ability to maintain and expand our existing relationships with leading OEMs in
order to maintain and increase our revenue; increasing competition and new
entrants in the market for our products; our ability to develop new or enhanced
products or technologies in a timely manner that achieve market acceptance; our
reliance on third parties to manufacture, assemble, and test our products and
sub-components; government trade restrictions and import/export controls;
financial risks, including risks relating to currency fluctuations, credit risks
and fluctuations in the market value of the Company; and changes in tax laws,
changes in tax rates and exposure to additional tax liabilities; and other
risks, relevant factors, and uncertainties identified in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2018, subsequent Reports on
Forms 10-Q and 8-K and our other filings we make with the U.S. Securities and
Exchange Commission (the “SEC”). Knowles disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law.

 

 

 

Important Additional Information and Where to Find It

 

The Company has filed a definitive a proxy statement on Schedule 14A and
accompanying WHITE proxy card with the SEC in connection with the solicitation
of proxies for its 2019 Annual Meeting of Shareholders (the “Definitive Proxy
Statement”). SHAREHOLDERS ARE STRONGLY ADVISED TO READ THE COMPANY’S DEFINITIVE
PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER
DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Shareholders may obtain a free copy of the
Definitive Proxy Statement and accompanying WHITE proxy card, any amendments or
supplements to the Definitive Proxy Statement and other documents that the
Company files with the SEC from the SEC’s website at www.sec.gov or the
Company’s website at www.investor.knowles.com as soon as reasonably practicable
after such materials are electronically filed with, or furnished to, the SEC.

 

Contact:

 

Mike Knapp

Investor Relations

Phone: (630) 238-5236

Email: Mike.Knapp@knowles.com

 

Media:

 

Matthew Sherman / Nicholas Lamplough / Mahmoud Siddig
Joele Frank, Wilkinson, Brimmer, Katcher
(212) 355-4449

 

 

 

Exhibit E

 

Form of Confidentiality Agreement

 

 

 

Knowles Corporation

1151 Maplewood Drive

Itasca, Illinois 60143

 

[•], 2019

 

Caligan Partners LP

Caligan Partners CV I LP

Caligan Partners CV GP LLC

Caligan Partners GP, LLC

Samuel J. Merksamer

David E. Johnson
520 Madison Avenue
New York, NY 10022

 

Falcon Edge Capital, LP

Falcon Edge (Cayman) GP, Ltd.

Falcon Edge Global Master Fund, LP

Moraine Master Fund, LP

Patriot Global Management, LP

Jonathan Christodoro
660 Madison Avenue, 19th Floor
New York, NY 10065

 

Steven F. Mayer

11812 San Vincente Boulevard, Suite 300

Los Angeles, CA 90049

 

Re:     Confidentiality Agreement

 

Ladies and Gentlemen:

 

This letter agreement shall become effective upon the appointment of Steven F.
Mayer (the “Investor Group Designee”) to the Board of Directors (the “Board”) of
Knowles Corporation, a Delaware corporation (the “Company”), pursuant to the
Settlement Agreement, dated as of May 9, 2019 (the “Settlement Agreement”), by
and among the Company, on the one hand, and Caligan Partners CV I LP, a Cayman
Islands exempted limited partnership (“Caligan CV I”), Caligan Partners LP, a
Delaware limited partnership, Caligan Partners CV GP LLC, a Delaware limited
liability company, Caligan Partners GP, LLC, a Delaware limited liability
company, Falcon Edge Capital, LP, a Delaware limited partnership, Falcon Edge
(Cayman) GP, Ltd., a Cayman Islands corporation, Falcon Edge Global Master Fund,
LP, a Cayman Islands exempted limited partnership, Moraine Master Fund, LP, a
Cayman Islands exempted limited partnership, Patriot Global Management, LP, a
Delaware limited partnership, Samuel J. Merksamer, an individual, David E.
Johnson, an individual, and Jonathan Christodoro, an individual (the foregoing,
together with Caligan CV I, and collectively with each of their respective
Affiliates, the “Investor Group”), on the other hand. Capitalized terms used and
not otherwise defined herein have the meanings given to such terms in the
Settlement Agreement. For the avoidance of doubt, the Investor Group Designee
shall not be deemed part of, or to have the rights or obligations of, or to be a
Representative of, the Investor Group for purposes of this letter agreement.

 

 

 

Upon the terms of, and subject to the conditions in, this letter agreement, the
Investor Group and its Representatives may receive certain Confidential
Information (as defined herein) about the Company and its Affiliates from the
Investor Group Designee or his Replacement Designee (in either case, the
“Investor Group Director”) obtained in his or her capacity as a director of the
Company that is confidential or proprietary, the disclosure of which could harm
the Company or its Affiliates. The Company understands and agrees that, upon the
terms of, and subject to the conditions in, this letter agreement, the Investor
Group Director may disclose Confidential Information to the Investor Group or
its Representatives, and that such disclosure on the terms of, and subject to
the conditions in, this letter agreement shall not constitute a breach of or
failure to comply with the Company’s Certificate of Incorporation (as amended
and as may be further amended from time to time), By-Laws (as amended and as may
be further amended from time to time), committee charters, corporate governance,
ethics, conflict of interest, confidentiality, and similar governance documents
that are generally applicable to the Company’s directors.

 

1.The Investor Group Director and the Investor Group understand and agree that
the Investor Group Director, when acting in his or her capacity as a director of
the Company, shall be subject in all cases to the fiduciary duties owed to the
Company and its stockholders imposed by Delaware law. It is understood and
agreed that the Investor Group Director shall not disclose to the Investor Group
or its Representatives (a) any confidential or proprietary information of any
third party in the possession of the Company or any of its Affiliates for which
the Investor Group Director has actual knowledge, prior to such disclosure, that
the Company or any of its Affiliates is prohibited from disclosing pursuant to a
contractual, fiduciary or other legal obligation or duty of confidentiality; and
(b) any legal advice or information that is specifically identified to the
Investor Group Director, prior to such disclosure, as protected by the Company’s
or any of its Affiliates’ attorney-client privilege, attorney work-product
privilege or any other applicable privilege (both with respect to internal or
external legal counsel). Accordingly, and in furtherance of the foregoing, the
Investor Group agrees not to claim or contend that the Company has waived any
attorney client privilege, work product doctrine or any other applicable
privilege by permitting the proffer of information pursuant to this letter
agreement. The Company shall, as promptly as reasonably possible and in good
faith, respond to any request by the Investor Group Director for advice as to
whether any particular Confidential Information is not to be disclosed by the
Investor Group Director in accordance with clause (a) or (b) above, or otherwise
in accordance with applicable law, and the Investor Group Director may, but
shall not be required to, rely on such advice for purposes of this Section 1.
The term “Representatives” shall mean (i) with respect to the Company, members
of the Board, officers, financial advisers and attorneys and (ii) with respect
to the Investor Group, any of its controlled affiliates and its and their
partners, directors, officers or employees, attorneys, accountants and financial
and other advisers (excluding, for the avoidance of doubt, any member of the
Board).

 

2

 

 

2.For purposes of this letter agreement, the term “Confidential Information”
includes all information concerning or relating to the Company that is furnished
directly or indirectly by the Company or any of its Representatives prior to the
termination of this letter agreement, whether or not marked as confidential,
whether furnished before or after the date of the Agreement, whether oral,
written or electronic, and regardless of the manner in which it is furnished,
together with any notes, reports, summaries, analyses, compilations, forecasts,
studies, interpretations, memoranda or other materials that contain, reference,
reflect or are based upon, in whole or in part, any such information. The term
“Confidential Information” does not include information that (a) was within the
Investor Group’s or any of its Representatives’ possession prior to it being
furnished to the Investor Group Director by the Company or its Representatives;
(b) is or becomes available to the Investor Group or its Representatives from a
source other than the Company or its Representatives; (c) is or becomes
generally available to the public; or (d) has been or is independently developed
by the Investor Group or its Representatives without the use of the Confidential
Information or in violation of the terms of this letter agreement; provided
that, in the case of (a), (b) and (c), such information was not known by the
Investor Group or its Representatives to have been provided in violation of any
contractual, fiduciary or other legal obligation of confidentiality owed to the
Company or an Affiliate thereof and in the case of (b) and (c), such information
becomes available other than as a result of a disclosure by the Investor Group
or its Representatives in violation of this letter agreement or in violation of
any other confidentiality or non-use obligations. Notwithstanding the foregoing,
specific aspects or details of Confidential Information shall not be deemed to
be within the public domain or in the Investor Group’s possession on a
non-confidential basis merely because Confidential Information is embraced by
more general information in the public domain or in the Investor Group’s
possession prior to the date hereof. Further, any combination of Confidential
Information shall not be considered in the public domain or in the Investor
Group’s possession on a non-confidential basis merely because individual
elements of such Confidential Information are in the public domain or are in
Investor Group’s possession prior to the date hereof.

 

3.As a condition to the Investor Group or any of its Representatives being
furnished with the Confidential Information, the Investor Group agrees to treat
as confidential, and to instruct its Representatives to treat as confidential,
any Confidential Information that is furnished to the Investor Group or its
Representatives by or on behalf of the Investor Group Director, the Company or
its Representatives in accordance with the provisions of this letter agreement,
and to take or abstain from taking, and to instruct its Representatives to take
or abstain from taking, certain other actions as set forth herein. The Investor
Group further agrees that it shall use the Confidential Information solely for
the purpose of monitoring and evaluating the Investor Group’s investment in the
Company; provided, however, that the Investor Group may disclose the
Confidential Information (a) to any of its Representatives who need to know such
information for the purpose of monitoring and evaluating their investment in the
Company or (b) as the Company may otherwise consent in writing. The Investor
Group shall (i) inform any such Representative of the confidential nature of the
Confidential Information and (ii) direct such Representative to keep the
Confidential Information strictly confidential according to the terms of this
letter agreement. The Investor Group agrees to be responsible for any breaches
of any of the provisions of this letter agreement by any of its Representatives
as if they were a party hereto (it being understood that such responsibility
shall be in addition to and not by way of limitation of any right or remedy the
Company may have against the Investor Group’s Representatives with respect to
such breach).

 

3

 

 

4.The Investor Group hereby acknowledges that it is aware (and the Investor
Group shall also advise each of its Representatives that is provided
Confidential Information) (a) of its obligations under U.S. securities laws and
regulations, (b) that the Confidential Information may contain material
non-public information concerning the Company and (c) that U.S. securities laws
and regulations may restrict any person who has material, non-public information
concerning an issuer from purchasing or selling securities of such issuer or
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities. The Investor Group agrees that it and its Representatives in
possession of material non-public information concerning the Company shall
refrain from trading in the securities of the Company in violation of U.S.
securities laws and regulations while in possession of any such material
non-public information. Each of the Company and the Investor Group further
acknowledges its respective acknowledgements and obligations as well as those of
its Representatives (as applicable) under Section 8 of the Settlement Agreement.

 

5.Notwithstanding anything to the contrary provided in this letter agreement, in
the event the Investor Group or any of its Representatives receives a request or
is required by deposition, interrogatory, request for documents, subpoena, court
order, similar judicial process, civil investigative demand or similar process
or pursuant to a request from a regulatory examiner (any such requested or
required disclosure, an “External Demand”) or is otherwise required pursuant to
applicable law, regulation or the rules of any governmental, national securities
exchange or other regulatory authority to disclose all or any part of the
Confidential Information (as determined based on the advice of outside legal
counsel), the Investor Group agrees, and agrees to instruct its Representatives,
to the extent permitted by applicable law, (a) to promptly notify the Company of
the existence, terms and circumstances surrounding such External Demand or other
requirement and (b) to cooperate with the Company in seeking a protective order
or other appropriate remedy to the extent available under the circumstances. In
the event that such protective order or other remedy is not obtained or not
available or that the Company waives compliance with the provisions hereof, the
Investor Group or its Representatives, as the case may be, (i) may disclose only
that portion of the Confidential Information which the Investor Group or its
Representatives are advised by outside legal counsel, is legally required to be
disclosed, (ii) shall inform the recipient of such Confidential Information of
the existence of this letter agreement and the confidential nature of such
Confidential Information and (iii) shall exercise reasonable efforts to obtain
assurances that confidential treatment will be accorded to the Confidential
Information. For the avoidance of doubt, it is understood and agreed that there
shall be no “applicable law,” “regulation” or “rule” requiring the Investor
Group or its Representatives to disclose any Confidential Information solely by
virtue of the fact that, absent such disclosure, the Investor Group or its
Representatives would be prohibited from purchasing, selling or engaging in
derivative or other voluntary transactions with respect to the securities of the
Company or the Investor Group or its Representatives would be unable to file any
proxy materials or tender or exchange offer materials in compliance with Section
14 of the Exchange Act or the rules promulgated thereunder. It is further
understood that following the Termination Date and subject to the terms and
conditions herein, nothing contained in this letter agreement (including,
without limitation, Section 3 of this letter agreement) shall in and of itself
prevent the Investor Group or its Representatives from (i) nominating any person
to serve as a director of the Company or from proposing any other business or
(ii) engaging in any solicitation of proxies or consents or becoming a
“participant” in a “solicitation” (as such terms are defined in Regulation 14A
under the Exchange Act) of proxies or consents with respect to securities of the
Company; provided, however, that (A) in taking any of the foregoing actions, the
Investor Group or its Representatives will treat all Confidential Information in
accordance with the provisions of this letter agreement, and (B) the Investor
Group acknowledges that Section 3 of the Settlement Agreement prohibits the
foregoing actions.

 

4

 

 

6.Within 10 days following the termination of this letter agreement in
accordance with its terms and at the Investor Group’s option, the Investor Group
and its Representatives shall either promptly (a) destroy the Confidential
Information and any copies thereof or (b) return to the Company all Confidential
Information and any copies thereof, and in either case, certify in writing to
the Company that all such material has been destroyed or returned, as
applicable, in compliance with this letter agreement; provided, however, that
the Investor Group and its Representatives shall be permitted to retain
Confidential Information to the extent necessary to comply with applicable law,
professional standards or the Investor Group or its Representatives’ document
retention policies of general application, or to the extent disclosed pursuant
to an External Demand. To the extent any Confidential Information is retained
pursuant to the preceding sentence, the Investor Group and its Representatives
shall continue to be bound by the obligations contained herein with respect to
such Confidential Information retained by the Investor Group or its
Representatives for such period of time as prescribed by this letter agreement.

 

7.During the term of this letter agreement and continuing for a period of 18
months following the termination of this letter agreement, the Investor Group
and its Representatives shall not, without the prior written approval of the
Board, directly or indirectly, for the Investor Group or on behalf of, or in
conjunction with, any other person or entity of any nature, solicit, canvass,
approach, or induce any employee or contractor of the Company to terminate his,
her or its employment or engagement with the Company or any of its Affiliates or
Associates, other than by means of a general advertisement that is not directed
at any particular employee or contractor of the Company.

 

8.The Investor Group agrees that it shall, at the Investor Group’s sole expense,
use its reasonable best efforts to undertake all measures necessary or
appropriate, including, without limitation, court proceedings, (a) to restrain
the Investor Group’s Representatives from prohibited or unauthorized disclosure
or use of any Confidential Information and (b) to safeguard and protect the
confidentiality of the Confidential Information disclosed to the Investor Group
or any of its Representatives and to prevent the use of any Confidential
Information in any way that would violate any applicable law or this letter
agreement. The Investor Group shall notify the Company promptly, in writing, of
any misuse, misappropriation or unauthorized disclosure of any Confidential
Information which may come to the Investor Group’s attention. The Investor Group
shall be responsible for any breach of this letter agreement by the Investor
Group and any deemed breach of this letter agreement by any of the Investor
Group’s Representatives and by any other person to whom the Investor Group
discloses any Confidential Information, whether or not such disclosure is
permitted hereunder, as if such Representatives or other persons were parties
hereto and had the Investor Group’s obligations hereunder.

 

5

 

 

9.The Investor Group acknowledges and agrees that the Company would be
irreparably injured by an actual breach of this letter agreement and that
monetary remedies would be inadequate to protect the Company against any actual
or threatened breach or continuation of any breach of this letter agreement.
Without prejudice to any other rights and remedies otherwise available to the
Company under this letter agreement, the Company shall be entitled to equitable
relief by way of injunction or otherwise and specific performance of the
provisions hereof upon satisfying the requirements to obtain such relief without
the necessity of posting a bond or other security, if the Investor Group or any
of its Representatives breach or threaten to breach any provision of this letter
agreement. Such remedy shall not be deemed to be the exclusive remedy for a
breach of this letter agreement but shall be in addition to all other remedies
available at law or equity to the non-breaching party.

 

10.The Investor Group agrees that (a) none of the Company or its Representatives
shall have any liability to the Investor Group or any of its Representatives
resulting from the selection, use or content of the Confidential Information by
the Investor Group or its Representatives and (b) none of the Company or its
Representatives makes any representation or warranty, express or implied, as to
the accuracy or completeness of any Confidential Information. This letter
agreement shall not create any obligation on the part of the Company or its
Representatives to provide the Investor Group or its Representatives with any
Confidential Information, nor shall it entitle the Investor Group or its
Representatives to participate in any meeting of the Board or any committee
thereof. All Confidential Information shall remain the property of the Company
and its Affiliates. Neither the Investor Group nor any of its Representatives
shall by virtue of any disclosure of, and/or the Investor Group’s or its
Representatives’ use of, any Confidential Information acquire any rights with
respect thereto; all such rights shall remain exclusively with the Company and
its Affiliates. The Investor Group and its Representatives shall not initiate
contact with any officer or employee of the Company concerning Confidential
Information other than as permitted by the terms of the Settlement Agreement,
unless otherwise approved in writing by the Company; provided, however, the
restrictions set forth in this sentence shall not apply to the Investor Group
Director, acting in his capacity as such, or any other officer or employee of
the Company who is also serving as a director.

 

11.Except as otherwise set forth herein, this letter agreement and the
obligations and restrictions hereunder shall terminate 18 months from the
earlier of (a) the date on which the Investor Group Director ceases to be a
director of the Company and (b) the date on which the Investor Group delivers
written notice to the Company that it no longer wishes to receive any
Confidential Information under this Agreement; provided however, that any
liability for breach of this letter agreement prior to termination under this
Section 11 shall survive such termination.

 

12.No failure or delay by any party or any of its Representatives in exercising
any right, power or privilege under this letter agreement shall operate as a
waiver thereof, and no modification hereof shall be effective, unless in writing
and signed by the Investor Group and the Company.

 

6

 

 

13.The illegality, invalidity or unenforceability of any provision hereof under
the laws of any jurisdiction shall not affect its legality, validity or
enforceability under the laws of any other jurisdiction, nor the legality,
validity or enforceability of any other provision hereof.

 

14.This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without giving effect to the choice of law
principles of such state that may direct application of laws of another
jurisdiction. Each party hereto hereby irrevocably and unconditionally consents
to the exclusive institution and resolution of any action, suit or proceeding of
any kind or nature with respect to or arising out of this letter agreement
brought by any party hereto in the United States District Court for the District
of Delaware or, if there is no federal subject matter jurisdiction, in the
Delaware Court of Chancery. Each party hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this letter agreement in such court, and further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. The parties agree that a final
judgment in any such dispute shall be conclusive and may be enforced in other
jurisdictions by suits on the judgment or in any other manner provided by law.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF, OR RELATING TO, THIS LETTER AGREEMENT.
In the event of litigation relating to this letter agreement, if a court of
competent jurisdiction determines that a party has breached this letter
agreement, then such breaching party shall be liable for, and shall pay, the
reasonable legal fees, costs and expenses that the non-breaching party has
incurred in connection with such litigation, including any appeal therefrom. In
addition, in the event of litigation relating to this letter agreement or the
Settlement Agreement between the Company and any member of the Investor Group,
if the Investor Group Director incurs any legal or other fees, costs or expenses
in his or her capacity as a deponent, witness, or other nonparty, the breaching
party shall promptly, upon demand therefor, reimburse the Investor Group
Director for all such reasonable fees, costs and expenses.

 

15.Any notice or other communication required or permitted under this letter
agreement to the Company or the Investor Group shall be provided pursuant to
Section 13 of the Settlement Agreement.

 

16.This letter agreement and the Settlement Agreement (including the exhibits
thereto) constitute the only agreement between the parties hereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written. For the
avoidance of doubt, nothing in this letter agreement supplements, modifies or
amends the “Standstill Restrictions”, the entirety of which are contained in
Section 3 of the Settlement Agreement. This letter agreement may be amended only
by an agreement in writing executed by the Company and the Investor Group.

 

17.This letter agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Any assignment of
this letter agreement by the Investor Group (including by operation of law) or
the Investor Group Director without the prior written consent of the Company
shall be void ab initio. Any purchaser of the Company or of all, or
substantially all, the Company’s assets shall be entitled to the benefits of
this letter agreement, whether or not this letter agreement is assigned to such
purchaser.

 

7

 

 

18.Each party to this letter agreement acknowledges that it has been represented
by counsel of its choice throughout all negotiations that have preceded the
execution of this letter agreement, and that it has executed this letter
agreement with the advice of such counsel. Each party and its counsel cooperated
and participated in the drafting and preparation of this letter agreement and
the documents referred to herein, and any and all drafts relating thereto
exchanged among the parties hereto shall be deemed the work product of all of
the parties and may not be construed against any party by reason of its drafting
or preparation. Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this letter agreement against any
party that drafted or prepared it is of no application and is hereby expressly
waived by each of the parties hereto, and any controversy over interpretations
of this letter agreement shall be decided without regards to events of drafting
or preparation.

 

19.This letter agreement may be executed in separate counterparts (including by
fax, .jpeg, .gif, .bmp and .pdf), each of which when so executed shall be an
original, but all such counterparts shall together constitute one and the same
instrument.

 

[Signature Pages Follow]

 

8

 

 

  Very truly yours,       KNOWLES CORPORATION       By:     Name: Jeffrey S.
Niew   Title: President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE PAGE TO CONFIDENTIALITY AGREEMENT

 

 

 

ACCEPTED AND AGREED TO BY:

CALIGAN PARTNERS LP

 

 

By: __________________________________

Name: Samuel J. Merksamer

Title: Partner

 

CALIGAN PARTNERS CV I LP

 

By: Caligan Partners LP, its investment manager

 

 

By:__________________________________

Name: Samuel J. Merksamer

Title: Partner

 

CALIGAN PARTNERS CV GP LLC

 

 

By: __________________________________

Name: Samuel J. Merksamer

Title: Managing Member

 

CALIGAN PARTNERS GP, LLC

 

 

By: __________________________________

Name: Samuel J. Merksamer

Title: Managing Member

 

FALCON EDGE CAPITAL, LP

 

 

By: __________________________________

Name: Mark Cho

Title: Authorized Signatory

 

FALCON EDGE (CAYMAN) GP, LTD.

 

 

By: __________________________________

Name: Mark Cho

Title: Authorized Signatory

 

 

SIGNATURE PAGE TO CONFIDENTIALITY AGREEMENT

 

 

FALCON EDGE GLOBAL MASTER FUND, LP

 

By: Falcon Edge Capital LP, its investment manager 

 

By: __________________________________

Name: Mark Cho

Title: Authorized Signatory

 

MORAINE MASTER FUND, LP

 

By: Falcon Edge Capital LP, its investment manager 

 

By: __________________________________

Name: Mark Cho

Title: Authorized Signatory 

 

PATRIOT GLOBAL MANAGEMENT, LP 

 

By:__________________________________

Name: Jonathan Christodoro

Title: Authorized Signatory

 

SAMUEL J. MERKSAMER

 

__________________________________

  

DAVID E. JOHNSON

 

__________________________________ 

 

JONATHAN CHRISTODORO

 

__________________________________

 

STEVEN F. MAYER

 

__________________________________

  

 

 

SIGNATURE PAGE TO CONFIDENTIALITY AGREEMENT