EXHIBIT 4.1
STOCKHOLDERS AGREEMENT
BY AND AMONG
WII HOLDINGS, INC.
AND
THE STOCKHOLDERS
AS DEFINED HEREIN
DATED AS OF APRIL 9, 2003
TABLE OF CONTENTS
Page
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SECTION I. DEFINITIONS...........................................................................1
1.1 Construction of Terms.................................................................1
1.2 Number of Shares of Stock.............................................................1
1.3 Defined Terms.........................................................................1
SECTION II. REPRESENTATIONS AND WARRANTIES.......................................................4
2.1 Representations and Warranties of the Stockholders....................................4
SECTION III. RESTRICTIONS ON TRANSFER BY RESTRICTED STOCKHOLDERS.................................4
3.1 Restrictions on Transfer..............................................................4
3.2 Permitted Transfers...................................................................4
3.3 Right of First Refusal................................................................5
3.4 Investor Co-Sale Option...............................................................7
3.5 Contemporaneous Transfers.............................................................9
3.6 Effect of Prohibited Transfers........................................................9
SECTION IV. RESTRICTIONS ON TRANSFER BY INVESTORS................................................9
4.1 Restrictions on Transfer..............................................................9
4.2 Permitted Transfers...................................................................9
4.3 Management Stockholder Co-Sale Option.................................................9
4.4 Contemporaneous Transfers............................................................11
4.5 Effect of Prohibited Transfers.......................................................11
SECTION V. RIGHTS AND OBLIGATIONS TO SELL.......................................................12
5.1 Drag-Along Rights....................................................................12
5.2 Procedure............................................................................12
SECTION VI. RIGHTS TO PURCHASE..................................................................13
6.1 Right to Participate in Certain Sales of Additional Securities.......................13
6.2 Acceptance...........................................................................13
6.3 Calculation of Pro Rata Allotment....................................................13
6.4 Sale to Third Party..................................................................13
6.5 Exceptions to Pre-Emptive Rights.....................................................14
SECTION VII. ELECTION OF DIRECTORS..............................................................14
7.1 Board Composition....................................................................17
7.2 Removal; Vacancies...................................................................18
7.3 Committees of the Board..............................................................18
7.4 Assignment...........................................................................18
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SECTION VIII. MISCELLANEOUS PROVISIONS..........................................................18
8.1 Reliance.............................................................................18
8.2 Legend on Securities.................................................................18
8.3 Amendment and Waiver; Actions of the Board...........................................19
8.4 Notices..............................................................................19
8.5 Headings.............................................................................19
8.6 Counterparts.........................................................................19
8.7 Remedies; Severability...............................................................19
8.8 Entire Agreement.....................................................................20
8.9 Adjustments..........................................................................20
8.10 Law Governing........................................................................20
8.11 Successors and Assigns...............................................................20
8.12 Arbitration of Disputes..............................................................20
8.13 Consent to Jurisdiction..............................................................21
8.14 Termination..........................................................................21
8.15 Construction.........................................................................21
EXHIBITS
Exhibit A - Form of Joinder Agreement
Exhibit B - Form of Power of Attorney
SCHEDULES
Schedule A - Management Stockholders, Other Stockholders, Debt Investors and
Investors
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STOCKHOLDERS AGREEMENT
THIS
STOCKHOLDERS AGREEMENT (the "Agreement") is made as of April 9, 2003,
by and among WII Holdings, Inc., a Delaware corporation (the "Company"), the
Persons identified on SCHEDULE A hereto as Investors (collectively, the
"Investors," and each individually, an "Investor"), the Persons identified on
SCHEDULE A hereto as the Debt Investors (the "Debt Investor"), the Persons
identified on SCHEDULE A hereto as Management Stockholders (collectively, the
"Management Stockholders," and each individually, a "Management Stockholder"),
the Persons identified on SCHEDULE A hereto as Other Stockholders (each, an
"Other Stockholder" and collectively the "Other Stockholders") and any other
Person who from time to time becomes party to this Agreement by execution of a
Joinder Agreement in substantially the form attached hereto as EXHIBIT A (the
"Joinder Agreement"). For the purpose of this Agreement, a Person who joins this
Agreement pursuant to a Joinder Agreement shall be included in the term "Debt
Investor," "Management Stockholder," "Investors" or "Other Stockholder" as
specified in such Joinder Agreement. The Management Stockholders, Other
Stockholders, the Debt Investor, and the Investors are sometimes referred to
herein collectively as the "Stockholders," and each individually, a
"Stockholder."
WHEREAS, each Stockholder owns the number of shares of capital stock of the
Company set forth opposite the name of such Stockholder on SCHEDULE A of this
Agreement; and
WHEREAS, the parties hereto desire to agree upon the terms on which the
securities of the Company, now or hereafter outstanding and held by them, will
be held, transferred and voted.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
SECTION I. DEFINITIONS
1.1 CONSTRUCTION OF TERMS. As used herein, the masculine, feminine or
neuter gender, and the singular or plural number, shall be deemed to be or to
include the other genders or number, as the case may be, whenever the context so
indicates or requires. Any reference to "day" shall mean a calendar day unless
indicated otherwise.
1.2 NUMBER OF SHARES OF STOCK. Whenever any provision of this Agreement
calls for any calculation based on a number of shares of capital stock issued
and outstanding or held by a Stockholder, the number of shares deemed to be
issued and outstanding or held by that Stockholder, unless specifically stated
otherwise, as applicable, shall be determined on a fully diluted basis as the
total number of shares of Common Stock then issued and outstanding or owned by
the Stockholder, as applicable, plus, without duplication, the total number of
shares of Common Stock issuable upon exercise of any vested options, warrants or
subscription rights then owned by such Stockholder.
1.3 DEFINED TERMS . The following capitalized terms, as used in this
Agreement, shall have the meanings set forth below.
"AFFILIATE" shall mean with respect to any Person (as defined below), any
Person which, directly or indirectly, controls, is controlled by or is under
common control with such Person, and shall include any partner or retired
partner, officer, managing director or retired managing director, director,
member or retired member, principal or retired principal, or employee of such
Person, and with respect to any Person that is a venture capital fund, the term
Affiliate shall also include any investment fund now or hereafter existing which
is controlled by or under common control with one or more general partners of
such Person.
"ACQUISITION AGREEMENT" means that certain Purchase and Exchange Agreement
dated as of the date hereof by and among the Company, the Investors, the Debt
Investors and the Management Stockholders, as amended from time to time.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"CHARTER" means the Company's Amended and Restated Certificate of
Incorporation in effect as of the date hereof, as amended from time to time.
"COMMON STOCK" means the Company's (i) Nonvoting Common, (ii) Voting
Common, and (iii) any other common equity securities issued by the Company, and
any other shares of stock issued or issuable with respect thereto (whether by
way of a stock dividend or stock split or in exchange for or upon conversion of
such shares or otherwise in connection with a combination of shares,
recapitalization, merger, consolidation or other corporate reorganization).
"COMPANY" means WII Holdings, Inc., a Delaware corporation and any
successors thereto.
"CREDIT AGREEMENT" means that certain $90,500,000 Credit Facility Credit
Agreement dated as April 9, 2003, by and among the Woodcraft Industries, Inc.,
Primewood, Inc., Brentwood Acquisition Corp., Antares Capital Corporation, as
Agent, and the other lenders from time to time party thereto, as the same may be
amended, modified, supplemented, restated, refinanced, replaced or substituted
from time to time pursuant to the terms thereof.
"DEBT INVESTOR" means those Persons identified as the Debt Investors on
SCHEDULE A hereto.
"EQUITY INCENTIVE PLAN" means the Company's 2003 Stock Option and Grant
Plan, as amended from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"INITIAL PUBLIC OFFERING" means the Company's first underwritten public
offering under the Securities Act of 1933, as amended.
"INVESTORS" means those Persons identified as Investors on SCHEDULE A
hereto.
"MAJORITY INTEREST" means the Investors holding not less than a majority of
the outstanding Shares held by all of the Investors, calculated in accordance
with Section 1.2 hereof.
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"MANAGEMENT STOCKHOLDERS" means those Persons identified as Management
Stockholders on SCHEDULE A hereto.
"NONVOTING COMMON" means the Company's nonvoting common stock, par value
$.01 per share.
"NOTES" means those certain Convertible Promissory Notes of the Company
issued pursuant to the Acquisition Agreement.
"OTHER STOCKHOLDERS" means those Persons identified as Other Stockholders
on SCHEDULE A hereto.
"PERSON" means an individual, a corporation, an association, a joint
venture, a partnership, a limited liability company, an estate, a trust, an
unincorporated organization and any other entity or organization, governmental
or otherwise.
"RESTRICTED STOCKHOLDERS" means the Management Stockholders, the Debt
Investors and the Other Stockholders.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means, at any time, shares of (i) Common Stock and (ii) any other
equity securities (including, but not limited to, securities or other
instruments convertible into equity securities) now or hereafter issued by the
Company, together with any options or warrants thereon and any other shares of
stock issued or issuable with respect thereto (whether by way of a stock
dividend, stock split or in exchange for or upon conversion of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization). At all times, the number of
Shares deemed issued and outstanding or held or to be voted by any Stockholder
shall be calculated in accordance with Section 1.2.
"STOCKHOLDERS" means, collectively, the Investors, the Debt Investors, the
Management Stockholders and the Other Stockholders.
"TRANSFER" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security, any interest
or rights in a security, or any rights under this Agreement. "Transferred" means
the accomplishment of a Transfer, and "Transferee" means the recipient of a
Transfer.
"VOTING COMMON" means the Company's voting common stock, par value $.01 per
share.
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SECTION II. REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each of the
Stockholders, individually and not jointly, hereby represents, warrants and
covenants to the Company and the other Stockholders as follows: (a) such
Stockholder has full authority, power and capacity to enter into this Agreement
and perform its obligations hereunder; (b) this Agreement constitutes the valid
and binding obligation of such Stockholder enforceable against him in accordance
with its terms, except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions may be limited
by applicable federal or state securities laws; and (c) the execution, delivery
and performance by such Stockholder of this Agreement: (i) does not and will not
violate any laws, rules or regulations of the United States or any state or
other jurisdiction applicable to such Stockholder, or require such Stockholder
to obtain any approval, consent or waiver of, or to make any filing with, any
Person that has not been obtained or made; and (ii) does not and will not result
in a breach of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of any indenture or loan or credit agreement
or any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which such Stockholder is a party or by which the
property of such Stockholder is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or properties of such Stockholder.
SECTION III. RESTRICTIONS ON TRANSFER BY RESTRICTED STOCKHOLDERS
3.1 RESTRICTIONS ON TRANSFER. Each Restricted Stockholder agrees that
such Restricted Stockholder will not, without the prior written consent of a
Majority Interest, Transfer all or any portion of the Shares now owned or
hereafter acquired by such Restricted Stockholder, except in connection with,
and strictly in compliance with the conditions of this Section III.
3.2 PERMITTED TRANSFERS. Notwithstanding anything herein to the
contrary, the provisions of Sections 3.3 and 3.4 shall not apply to either of
the Transfers listed below, PROVIDED that in each case the Transferee (a
"Permitted Transferee") shall have entered into a Joinder Agreement in
substantially the form attached hereto as EXHIBIT A providing that all Shares so
Transferred shall continue to be subject to all provisions of this Agreement as
if such Shares were still held by such Restricted Stockholder, except that no
other further Transfer shall thereafter be permitted hereunder except in
compliance with Sections 3.3 and 3.4:
(a) Transfers by any Restricted Stockholder to the spouse,
children or siblings of such Restricted Stockholder or to a trust or family
limited partnership for the benefit of any of them;
(b) Transfers upon the death of any Restricted Stockholder to
such Restricted Stockholder's heirs, executors or administrators or to a trust
under such Restricted Stockholder's will, or Transfers between such Restricted
Stockholder and such Restricted Stockholder's guardian or conservator; and
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(c) Transfers by the Debt Investors in connection with the
assignment of all, or any part of, the loans or the commitments in compliance
with the terms of the Credit Agreement (the "Credit Transferee") pursuant to
which the transferring Debt Investor Transfers all of its Shares (but not less
than all) in a single transaction or series of related transactions to the
Credit Transferee.
Notwithstanding anything to the contrary in this Agreement or any failure by a
Transferee under this Section 3.2 to execute a Joinder Agreement, such
Transferee shall take any Shares so Transferred subject to all provisions of
this Agreement as if such Shares were still held by the Restricted Stockholder
making such Transfer, whether or not they so agree in writing.
3.3 RIGHT OF FIRST REFUSAL. In the event that any of the Restricted
Stockholders entertains a bona fide offer to purchase all or any portion of the
Shares held by such Restricted Stockholder (a "Transaction Offer") from any
other Person or otherwise desires to Transfer any of its Shares, including any
Transfer pursuant to Section 4.3 (in each case, other than in connection with a
Transfer described in Section 3.2) (a "Buyer"), such Restricted Stockholder (a
"Transferring Restricted Stockholder") shall, subject to the provisions of
Section 3.4, Transfer such Shares pursuant to and in accordance with the
following provisions of this Section 3.3.
(a) OFFER NOTICE. The Transferring Restricted Stockholder shall
cause the Transaction Offer and all of the terms thereof to be reduced to
writing and shall promptly notify the Company and each of the Investors of such
Transferring Restricted Stockholder's desire to effect the Transaction Offer and
otherwise comply with the provisions of this Section 3.3 (such notice, the
"Offer Notice"). The Transferring Restricted Stockholder's Offer Notice shall
constitute an irrevocable offer to sell all but not less than all of the Shares
which are the subject of the Transaction Offer (the "Offered Shares") to the
Company and the Investors, on the basis described below, at a purchase price
equal to the price contained in, and on the same terms and conditions of, the
Transaction Offer. The Offer Notice shall be accompanied by a true copy of the
Transaction Offer (which shall identify the Buyer and all relevant information
in connection therewith).
(b) COMPANY OPTION. The Company shall have the first option to
purchase all or a portion of the Offered Shares. At any time within twenty (20)
days after receipt by the Company of the Offer Notice (the "Company Option
Period"), the Company may elect to accept the offer to purchase with respect to
any or all of the Offered Shares and shall give written notice of such election
(the "Company Acceptance Notice") to the Transferring Restricted Stockholder
within the Company Option Period, which notice shall indicate the number of
Shares that the Company is willing to purchase. Subject to the terms of Section
3.3(f) below, the Company Acceptance Notice shall constitute a valid, legally
binding and enforceable agreement for the sale and purchase of the Shares
covered by the Company Acceptance Notice. If the Company accepts the offer to
purchase all of the Offered Shares, the closing for such purchase of the Offered
Shares by the Company under this Section 3.3(b) shall take place within thirty
(30) days following the expiration of the Company Option Period, at the offices
of the Company or on such other date or at such other place as may be agreed to
by the Transferring Restricted Stockholder and the Company. If the Company fails
to purchase all of the Offered Shares by exercising its option under this
Section 3.3(b) within the period provided, the Transferring Restricted
Stockholder shall so notify the Investors promptly (the "Additional Offer
Notice"),
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which Additional Offer Notice shall identify the Offered Shares that the Company
has failed to purchase (the "Remaining Shares"). The Remaining Shares shall be
subject to the options granted to the Investors pursuant to Section 3.3(c)
below.
(c) INVESTORS' OPTION. If the Company fails to purchase all of
the Offered Shares under Section 3.3(b) above, at any time within ten (10) days
after receipt by the Investors of the Additional Offer Notice (the "Investor
Option Period"), each Investor or its Affiliates, including future funds that
have affiliated but not identical general partners, may elect to accept the
offer to purchase with respect to any or all of the Remaining Shares and shall
give written notice of such election (the "Investor Acceptance Notice") to the
Transferring Restricted Stockholder and each Investor within the Investor Option
Period, which notice shall indicate the maximum number of Shares that the
Investor is willing to purchase, including the number of Shares it would
purchase if one or more other Investors do not elect to purchase their Pro Rata
Fractions (as defined in paragraph (d) below). Subject to the terms of Section
3.3(f) below, the Investor Acceptance Notice shall constitute a valid, legally
binding and enforceable agreement for the sale and purchase of the Shares
covered by the Investor Acceptance Notice. The closing for any purchase of
Shares by the Investors under this Section 3.3(c) (along with the purchase by
the Company of any Shares under paragraph (b) above if the Company is purchasing
less than all of the Offered Shares) shall take place within thirty (30) days
following the expiration of Investor Option Period, at the offices of the
Company or on such other date or at such other place as may be agreed to by the
Transferring Restricted Stockholder and such Investors. The Transferring
Restricted Stockholder shall notify the Investors promptly if any Investor fails
to offer to purchase all of its Pro Rata Fraction.
(d) ALLOCATION OF SHARES AMONG INVESTORS. Upon the expiration of
the Investor Option Period, the number of Shares to be purchased by each
Investor shall be determined as follows: (i) first, there shall be allocated to
each Investor electing to purchase, a number of Shares equal to the lesser of
(A) the number of Shares as to which such Investor accepted as set forth in its
respective Investor Acceptance Notice or (B) such Investor's Pro Rata Fraction
(as defined below), and (ii) second, the balance, if any, not allocated under
clause (i) above, shall be allocated to those Investors who within the Investor
Option Period delivered an Investor Acceptance Notice that set forth a number of
Shares that exceeded their respective Pro Rata Fractions, in each case on a PRO
RATA basis in proportion to the number of Shares held by each such Investor up
to the amount of such excess. An Investor's Pro Rata Fraction shall be equal to
the product obtained by multiplying the total number of Remaining Shares by a
fraction, the NUMERATOR of which is the total number of Shares owned by such
Investor, and the DENOMINATOR of which is the total number of Shares held by all
Investors, in each case as of the date of the Offer Notice.
(e) VALUATION OF PROPERTY. In the event that the price set forth
in the Offer Notice is stated in consideration other than cash or cash
equivalents, the Transferring Restricted Stockholder, the Company and a Majority
Interest shall mutually determine the fair market value of such consideration,
reasonably and in good faith, and the Company and/or the Investors, as the case
may be, may effect their purchase under this Section 3.3 by payment of such fair
market value in cash or cash equivalents.
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(f) SALE TO THIRD PARTY. In the event that the Company and the
Investors do not elect to exercise the rights to purchase under this Section 3.3
with respect to all of the Shares proposed to be sold, the Transferring
Restricted Stockholder may sell the remaining balance of such Shares to the
Buyer on the terms and conditions set forth in the Offer Notice. Promptly after
such Transfer, the Transferring Restricted Stockholder shall notify the Company,
which in turn shall promptly notify all the Investors, of the consummation
thereof and shall furnish such evidence of the completion and time of completion
of the Transfer and of the terms thereof as may reasonably be requested by a
Majority Interest. Prior to the effectiveness of any Transfer to a Buyer
hereunder, such Buyer shall have entered into a Joinder Agreement in
substantially the form attached hereto as EXHIBIT A, and such Buyer shall have
all the rights and obligations hereunder as if such Buyer were a Debt Investor,
Management Stockholder or Other Stockholder, as the case may be. If the
Transferring Restricted Stockholder's sale to a Buyer is not consummated in
accordance with the terms of the Transaction Offer on or before sixty (60)
calendar days after the latest of: (i) the expiration of the Company Option
Period, (ii) the expiration of the Investor Option Period and (iii) the
satisfaction of all governmental approval or filing requirements, the
Transaction Offer shall be deemed to lapse, and any Transfers of Shares pursuant
to such Transaction Offer shall be in violation of the provisions of this
Agreement unless the Transferring Restricted Stockholder sends a new Offer
Notice and once again complies with the provisions of this Section 3.3 with
respect to such Transaction Offer.
3.4 INVESTOR CO-SALE OPTION. In the event that the Company and the
Investors do not exercise their rights under Section 3.3 with respect to all of
the Shares proposed to be so Transferred in connection with any Transaction
Offer, the Transferring Restricted Stockholder may Transfer such Shares only
pursuant to and in accordance with the following provisions of this Section 3.4:
(a) CO-SALE NOTICE. As soon as practicable following the
expiration of the Investor Option Period, and in no event later than five (5)
days thereafter, the Transferring Restricted Stockholder shall provide notice to
each of the Investors (the "Co-Sale Notice") of its right to participate in the
Transaction Offer on a pro rata basis with the Transferring Restricted
Stockholder (the "Co-Sale Option"). To the extent one or more Investors exercise
their Co-Sale Option in accordance with this Section 3.4, the number of Shares
that the Transferring Restricted Stockholder may Transfer in the Transaction
Offer shall be correspondingly reduced.
(b) INVESTOR ACCEPTANCE. Each of the Investors shall have the
right to exercise its Co-Sale Option by giving written notice of such intent to
participate (the "Co-Sale Acceptance Notice") to the Transferring Restricted
Stockholder within ten (10) days after receipt by such Investor of the Co-Sale
Notice (the "Co-Sale Election Period"). Each Co-Sale Acceptance Notice shall
indicate the maximum number of Shares subject thereto which the Investor wishes
to sell, including the number of Shares it would sell if one or more other
Investors do not elect to participate in the sale on the terms and conditions
stated in the Offer Notice. Any Investor holding Preferred Stock shall be
permitted to sell to the relevant Buyer in connection with any exercise of the
Co-Sale Option, at its option, (i) shares of Common Stock acquired upon
conversion of such Preferred Stock or (ii) an option to acquire Common Stock
when such Investor receives the same upon conversion of such Preferred Stock,
with the same effect as if Common Stock were being conveyed.
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(c) ALLOCATION OF SHARES. Each Investor shall have the right to
sell a portion of its Shares pursuant to the Transaction Offer which is equal to
or less than the product obtained by multiplying the total number of Shares
available for sale to the Buyer subject to the Transaction Offer by a fraction,
the NUMERATOR of which is the total number of Shares owned by such Investor and
the DENOMINATOR of which is the total number of Shares held by all Investors and
the Transferring Restricted Stockholder, in each case as of the date of the
Offer Notice, subject to increase as hereinafter provided. In the event any
Investor does not elect to sell the full amount of such Shares which such
Investor is entitled to sell pursuant to this Section 3.4, then any Investors
who have elected to sell Shares shall have the right to sell, on a pro-rata
basis (based on the number of Shares held by each such Investor) with any other
Investors and up to the maximum number of Shares stated in each such Investor's
Co-Sale Acceptance Notice, any Shares not elected to be sold by such Investor.
(d) CO-SALE CLOSING. Within ten (10) calendar days after the end
of the Co-Sale Election Period, the Transferring Restricted Stockholder shall
promptly notify each participating Investor of the number of Shares held by such
Investor that will be included in the sale and the date on which the Transaction
Offer will be consummated, which shall be no later than the later of (i) thirty
(30) calendar days after the end of the Co-Sale Election Period and (ii) the
satisfaction of any governmental approval or filing requirements, if any. Each
participating Investor may effect its participation in any Transaction Offer
hereunder by delivery to the Buyer, or to the Transferring Restricted
Stockholder for delivery to the Buyer, of one or more instruments or
certificates, properly endorsed for transfer, representing the Shares it elects
to sell pursuant thereto. At the time of consummation of the Transaction Offer,
the Buyer shall remit directly to each participating Investor that portion of
the sale proceeds to which the participating Investor is entitled by reason of
its participation with respect thereto. No Shares may be purchased by the Buyer
from the Transferring Restricted Stockholder unless the Buyer simultaneously
purchases from the participating Investors all of the Shares that they have
elected to sell pursuant to this Section 3.4.
(e) LIABILITY OF INVESTORS. Each participating Investor shall be
liable to the Buyer only to same extent as the Transferring Restricted
Stockholder with respect to representations and warranties regarding the Company
or its business, on a several basis for each such Investor's pro rata portion,
provided that each such Investor's liability with respect to such
representations and warranties shall not exceed the value of the proceeds
received by such Investor upon the consummation of the Transaction Offer and,
provided further, that no Investor shall be required to make any other
representations or warranties or to provide any indemnities in connection
therewith other than with respect to title to the shares being conveyed.
(f) SALE TO THIRD PARTY. Any Shares held by a Transferring
Restricted Stockholder that are the subject of the Transaction Offer and that
the Transferring Restricted Stockholder desires to Transfer following compliance
with this Section 3.4, may be sold to the Buyer only during the period specified
in Section 3.4(d) and only on terms no more favorable to the Transferring
Restricted Stockholder than those contained in the Offer Notice. Promptly after
such Transfer, the Transferring Restricted Stockholder shall notify the Company,
which in turn shall promptly notify all the Investors, of the consummation
thereof and shall furnish such evidence of the completion and time of completion
of the Transfer and of the terms thereof as may reasonably be requested by a
Majority Interest. Prior to the effectiveness of any Transfer to
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a Buyer hereunder, such Buyer shall have entered into a Joinder Agreement in
substantially the form attached hereto as EXHIBIT A, and such Buyer shall have
all the rights and obligations hereunder as if such Buyer were a Restricted
Stockholder. In the event that the Transaction Offer is not consummated within
the period required by this Section 3.4 or the Buyer fails timely to remit to
each participating Investor its respective portion of the sale proceeds, the
Transaction Offer shall be deemed to lapse, and any Transfer of Shares pursuant
to such Transaction Offer shall be in violation of the provisions of this
Agreement unless the Transferring Restricted Stockholder sends a new Offer
Notice and once again complies with the provisions of Sections 3.3 and 3.4 with
respect to such Transaction Offer.
3.5 CONTEMPORANEOUS TRANSFERS. If two or more Restricted Stockholders
propose concurrent Transfers that are subject to this Article III, then the
relevant provisions of Sections 3.3 and 3.4, as applicable, shall apply
separately to each such proposed Transfer
3.6 EFFECT OF PROHIBITED TRANSFERS. If any Transfer by any Restricted
Stockholder is made or attempted contrary to the provisions of this Agreement,
such purported Transfer shall be void ab initio; the Company and the other
parties hereto shall have, in addition to any other legal or equitable remedies
which they may have, the right to enforce the provisions of this Agreement by
actions for specific performance (to the extent permitted by law); and the
Company shall have the right to refuse to recognize any Transferee as one of its
Stockholders for any purpose.
SECTION IV. RESTRICTIONS ON TRANSFER BY INVESTORS
4.1 RESTRICTIONS ON TRANSFER. Each Investor agrees that such Investor
will not Transfer all or any portion of the Shares now owned or hereafter
acquired by such Investor, except in connection with, and strictly in compliance
with the conditions of this Section IV.
4.2 PERMITTED TRANSFERS. Notwithstanding anything herein to the
contrary, the provisions of Section 4.3 shall not apply to Transfers by any
Investor to (i) an Affiliate thereof; (ii) to any partner, member or employee of
such Investor or a general partner or managing member of such Investor; (iii) to
a liquidating trust established for the benefit of any partners or members of
such Investor; or (iv) to any investment fund or other entity controlled or
managed by an affiliate of such Investor, PROVIDED that in each case the
Transferee shall have entered into a Joinder Agreement in substantially the form
attached hereto as EXHIBIT A providing that all Shares so Transferred shall
continue to be subject to all provisions of this Agreement as if such Shares
were still held by such Investor. Notwithstanding anything to the contrary in
this Agreement or any failure by a Transferee under this Section 4.2 to execute
a Joinder Agreement, such Transferee shall take any Shares so Transferred
subject to all provisions of this Agreement as if such Shares were still held by
the Investor making such Transfer, whether or not they so agree in writing.
4.3 DEBT INVESTOR AND MANAGEMENT STOCKHOLDER CO-SALE OPTION. In the
event that any of the Investors (in either case referred to herein as a
"Transferring Investor") entertains a bona fide offer to purchase all or any
portion of the Shares held by such Investor (an "Investor Transaction Offer")
from any Person or otherwise desires to Transfer any of its Shares, including in
a transfer pursuant to Section 3.4 (in each case, other than in connection with
a Transfer
9
pursuant to Section 4.2 above) (the "Investor Co-Sale Buyer"), the Transferring
Investor shall Transfer such Shares only pursuant to and in accordance with the
provisions of this Section 4.3.
(a) INVESTOR CO-SALE NOTICE. The Transferring Investor shall
cause the Investor Co-Sale Transaction and all of the terms thereof to be
reduced to writing and shall promptly notify the Company, the Debt Investors,
and the Management Stockholders and their Permitted Transferees of such
Transferring Investor's desire to effect the Investor Co-Sale Transaction (such
notice, the "Investor Co-Sale Notice") and of the Debt Investor's, Management
Stockholder's and their Permitted Transferee's right to participate in the
Investor Co-Sale Transaction with the Transferring Investor (the "Investor
Co-Sale Option"). To the extent one or more Debt Investors, Management
Stockholders and their Permitted Transferees exercise their Investor Co-Sale
Option in accordance with this Section 4.3, the number of Shares that the
Transferring Investor may Transfer in the Investor Co-Sale Transaction shall be
correspondingly reduced.
(b) ACCEPTANCE. Each of the Debt Investors, Management
Stockholders and their Permitted Transferees shall have the right to exercise
its Investor Co-Sale Option by giving written notice of such intent to
participate (the "Investor Co-Sale Acceptance Notice") to the Transferring
Investor within ten (10) days after receipt by such Management Stockholder or
Permitted Transferee of the Investor Co-Sale Notice (the "Investor Co-Sale
Election Period"). Each Investor Co-Sale Acceptance Notice shall indicate the
maximum number of Shares subject thereto which such Debt Investor, Management
Stockholder or Permitted Transferee wishes to sell, including the number of
Shares it would sell if one or more other Debt Investors, Management
Stockholders or Permitted Transferees do not elect to participate in the sale on
the terms and conditions stated in the Investor Co-Sale Notice.
(c) ALLOCATION OF SHARES. Each Debt Investor, Management
Stockholder and Permitted Transferee shall have the right to sell a portion of
its Shares pursuant to the Transaction Offer which is equal to or less than the
product obtained by multiplying the total number of Shares available for sale to
the Investor Co-Sale Buyer subject to the Co-Sale Transaction by a fraction, the
NUMERATOR of which is the total number of Shares owned by such Debt Investors,
Management Stockholder or Permitted Transferee and the DENOMINATOR of which is
the total number of Shares held by all Debt Investor, Management Stockholders
and Permitted Transferees and the Transferring Investor, in each case as of the
date of the Investor Co-Sale Notice, subject to increase as hereinafter
provided.
(d) INVESTOR CO-SALE CLOSING. Within ten (10) calendar days after
the end of the Investor Co-Sale Election Period, the Transferring Investor shall
promptly notify each participating Debt Investor, Management Stockholder and
Permitted Transferee of the number of Shares held by such Debt Investor,
Management Stockholder or Permitted Transferee that will be included in the sale
and the date on which the Investor Co-Sale Transaction will be consummated,
which shall be no later than the later of (i) thirty (30) calendar days after
the end of the Investor Co-Sale Election Period and (ii) the satisfaction of any
governmental approval or filing requirements, if any. Each participating Debt
Investor, Management Stockholder and Permitted Transferee may effect its
participation in any Investor Co-Sale Transaction hereunder by delivery to the
Investor Co-Sale Buyer, or to the Transferring Investor for delivery to the
Investor Co-Sale Buyer, of one or more instruments or certificates, properly
endorsed for
10
transfer, representing the Shares it elects to sell pursuant thereto. At the
time of consummation of the Investor Co-Sale Transaction, the Investor Co-Sale
Buyer shall remit directly to each participating Debt Investor, Management
Stockholder and Permitted Transferee that portion of the sale proceeds to which
the participating Debt Investor, Management Stockholder or Permitted Transferee
is entitled by reason of its participation with respect thereto. No Shares may
be purchased by the Investor Co-Sale Buyer from the Transferring Investor unless
the Investor Co-Sale Buyer simultaneously purchases from the participating Debt
Investor, Management Stockholders and Permitted Transferees all of the Shares
that they have elected to sell pursuant to this Section 4.3.
(e) LIABILITY OF STOCKHOLDERS. Each participating Debt Investor,
Management Stockholder or Permitted Transferee shall be liable to the Investor
Co-Sale Buyer only to same extent as the Investor with respect to
indemnification, on a several basis for each such Debt Investor, Management
Stockholder or Permitted Transferee's pro rata portion.
(f) SALE TO THIRD PARTY. Any Shares held by a Transferring
Investor that are the subject of the Investor Co-Sale Transaction and that the
Transferring Investor desires to Transfer following compliance with this Section
4.3, may be sold to the Investor Co-Sale Buyer only during the period specified
in Section 4.3(d) and only on terms no more favorable to the Transferring
Investor than those contained in the Investor Co-Sale Notice. Promptly after
such Transfer, the Transferring Investor shall notify the Company, which in turn
shall promptly notify all the Stockholders, of the consummation thereof and
shall furnish such evidence of the completion and time of completion of the
Transfer and of the terms thereof as may reasonably be requested by any party
hereto. Prior to the effectiveness of any Transfer to a Investor Co-Sale Buyer
hereunder, such Investor Co-Sale Buyer shall have entered into a Joinder
Agreement in substantially the form attached hereto as EXHIBIT A, and such
Investor Co-Sale Buyer shall have all the rights and obligations hereunder as if
such Investor Co-Sale Buyer were a Debt Investor, Management Stockholder or
Permitted Transferee. In the event that the Investor Co-Sale Transaction is not
consummated within the period required by this Section 4.3 or the Investor
Co-Sale Buyer fails timely to remit to each participating Stockholder its
respective portion of the sale proceeds, the Investor Co-Sale Option shall be
deemed to lapse, and any Transfer of Shares pursuant to such Investor Co-Sale
Transaction shall be in violation of the provisions of this Agreement unless the
Transferring Investor sends a new Investor Co-Sale Offer Notice and once again
complies with the provisions of this Section 4.3 with respect to such Investor
Co-Sale Transaction.
4.4 CONTEMPORANEOUS TRANSFERS. If two or more Investors propose
concurrent Transfers that are subject to this Section 4, then the relevant
provisions of Sections 4 shall apply separately to each such proposed Transfer.
4.5 EFFECT OF PROHIBITED TRANSFERS. If any Transfer by any Investor is
made or attempted contrary to the provisions of this Agreement, such purported
Transfer shall be void ab initio; the Company and the other parties hereto shall
have, in addition to any other legal or equitable remedies which they may have,
the right to enforce the provisions of this Agreement by actions for specific
performance (to the extent permitted by law); and the Company shall have the
right to refuse to recognize any Transferee as one of its Stockholders for any
purpose.
11
SECTION V. RIGHTS AND OBLIGATIONS TO SELL
5.1 DRAG-ALONG RIGHTS. In the event that a Majority Interest has a
determined to consummate a Sale Event (as defined below) in a bona fide arms
length transaction, each Restricted Stockholder shall be obligated to and shall
upon the written request of a Majority Interest: (i) sell, transfer and deliver,
or cause to be sold, transferred and delivered, to the third-party buyer a pro
rata portion of, his, her or its Shares (including those Shares Transferred to
and held by his, her or its Permitted Transferees) at the same price (with
respect to like Shares and as appropriately adjusted to reflect any differences
in the rights, preferences and privileges of Shares of different classes, series
or types) and on substantially the same terms applicable to the Investors; and
(ii) execute and deliver such instruments of conveyance and transfer and take
such other action, including voting such Shares in favor of any such Sale Event
proposed by a Majority Interest and executing any purchase agreements, merger
agreements, indemnity agreements, escrow agreements or related documents, as
such Investors or the third-party buyer may reasonably require in order to carry
out the terms and provisions of this Section 5.1 (the "Drag-Along Right").
Notwithstanding the foregoing, no Restricted Stockholder shall be required in
connection with any such transaction to make any representation, warranty or
covenant other than a representation and warranty as to such Restricted
Stockholder's power and authority to effect such Transfer and as to such
Restricted Stockholder's good title to the Shares to be Transferred to the
third-party buyer, provided that each Restricted Stockholder, by electing to
participate in such proposed Transfer, agrees to be obligated to indemnify the
third-party buyer upon the same terms and conditions as are applicable to the
indemnification, if any, given by the Investors in connection with such proposed
Transfer so long as all indemnification obligations are shared in proportion to
the consideration paid to each transferor and that the maximum liability of any
Restricted Stockholder under such indemnification shall not exceed the amount of
proceeds it receives in connection with such transaction.
For purposes of this Agreement, a "Sale Event" shall mean, regardless of
form thereof, consummation of (i) the dissolution or liquidation of the Company,
(ii) the sale of all or substantially all of the assets of the Company on a
consolidated basis to an unrelated person or entity, (iii) a merger,
reorganization or consolidation in which the outstanding shares of Stock are
converted into or exchanged for securities of the successor entity and the
holders of the Company's outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power of the
successor entity immediately upon completion of such transaction, (iv) the sale
of all or a majority of the outstanding capital stock of the Company to an
unrelated person or entity or (v) any other transaction in which the owners of
the Company's outstanding voting power immediately prior to such transaction do
not own at least a majority of the outstanding voting power of the successor
entity immediately upon completion of the transaction.
5.2 PROCEDURE. Not less than thirty (30) days prior to the date
proposed for the closing of any Sale Event, the Investors shall give notice to
each Restricted Stockholder, setting forth in reasonable detail the name or
names of the third-party buyer, the terms and conditions of the Sale Event,
including the purchase price, and the proposed closing date.
In furtherance of the provisions of this Section V, each Restricted
Stockholder (other than the Debt Investors) by executing the power-of-attorney
and proxy attached hereto as EXHIBIT B
12
hereby (i) irrevocably appoints the designee of the Majority Interest, as its
agent and attorney-in-fact (the "Agent") (with full power of substitution) to
execute all agreements, instruments and certificates and take all actions
necessary or desirable to effectuate any sale hereunder; and (ii) grants to the
Agent a proxy to vote the Shares held by the Restricted Stockholder in favor of
any Sale Event hereunder.
SECTION VI. RIGHTS TO PURCHASE
6.1 RIGHT TO PARTICIPATE IN CERTAIN SALES OF ADDITIONAL SECURITIES. The
Company agrees that it will not sell or issue or agree to sell or issue any (a)
Shares or (b) other debt instruments to ▇▇▇▇▇▇▇ Capital III, L.P. or one of its
Affiliates, unless the Company first submits a written notice to each Investor,
Debt Investor and Management Stockholder (collectively, the "Pre-Emptive Right
Parties" and individually, each a "Pre-emptive Right Party") identifying the
terms of the proposed sale (including price, number or aggregate principal
amount of securities and all other material terms), and offers to each
Pre-Emptive Right Party the opportunity to purchase its Pro Rata Allotment (as
hereinafter defined) of the securities (or debt instrument, if applicable)
(subject to increase for over-allotment if some Pre-Emptive Right Parties do not
fully exercise their rights) on terms and conditions, including price, not less
favorable than those on which the Company proposes to sell such securities (or
debt instrument, if applicable) to a third party or parties (a "Pre-Emptive
Right Notice"). The Company's offer pursuant to this Section 6.1 shall remain
open and irrevocable for a period of thirty (30) days following receipt by the
Pre-Emptive Right Parties of such written notice.
6.2 ACCEPTANCE. Each of the Pre-Emptive Right Parties shall have the
right to purchase its Pro Rata Allotment by giving written notice of such intent
to participate (the "Pre-emptive Right Acceptance Notice") to the Company within
twenty (20) days after receipt by such Pre-Emptive Right Party of the
Pre-Emptive Right Notice (the "Pre-Emptive Right Acceptance Election Period").
Each Pre-Emptive Right Acceptance Notice shall indicate the maximum number of
Shares (or amount of the debt instrument, if applicable) subject thereto which
the Pre-Emptive Right Party wishes to buy, including the number of Shares (or
amount of the debt instrument, if applicable) it would buy if one or more other
Pre-Emptive Right Parties do not elect to participate in the sale on the terms
and conditions stated in the Pre-Emptive Right Notice.
6.3 CALCULATION OF PRO RATA ALLOTMENT. Each Pre-Emptive Right Party's
"Pro Rata Allotment" of such securities (or debt instrument, if applicable)
shall be based on the ratio which the number of Shares owned by such Pre-Emptive
Right Party bears to all of the issued and outstanding Shares as of the date of
such written offer. If one or more Pre-Emptive Right Parties do not elect to
purchase their respective Pro Rata Allotment, each of the electing Pre-Emptive
Right Parties may purchase such shares of such Pre-Emptive Right Parties'
allotments taking into account the maximum amount each is wishing to purchase on
a pro rata basis, based upon the relative holdings of Shares of each of the
electing Pre-Emptive Right Parties in the case of over-subscription.
6.4 SALE TO THIRD PARTY. Any securities (or debt instrument, if
applicable) so offered that are not purchased by the Pre-Emptive Right Parties
pursuant to the offer set forth in
13
Section 6.1 above, may be sold by the Company, but only on terms and conditions
not more favorable to the purchaser than those set forth in the notice to
Pre-Emptive Right Parties, at any time after five (5) days but within sixty (60)
days following the termination of the above-referenced 30-day period, but may
not be sold to any other Person or on terms and conditions, including price,
that are more favorable to the purchaser than those set forth in such offer or
after such 60-day period without renewed compliance with this Section VI.
6.5 EXCEPTIONS TO PRE-EMPTIVE RIGHTS. Notwithstanding the foregoing,
the right to purchase granted under this Section VI shall be inapplicable with
respect to: (i) the issuance of shares of Common Stock (as appropriately
adjusted for any stock split, combination, reorganization, recapitalization,
reclassification, stock distribution, stock dividend or similar event) issued or
issuable in connection with, or upon the exercise of, options or other awards
granted or to be granted to employees, officers or directors of the Company
pursuant to the Company's Equity Incentive Plan, including shares of Common
Stock issued in replacement of shares of such Common Stock repurchased or
issuable upon the exercise of any options to purchase shares of such Common
Stock, to the extent permitted under the Equity Incentive Plan and, in each
case, as approved by the Board of Directors; (ii) securities issued as a result
of any stock split, stock dividend, reclassification or reorganization or
similar event with respect to the Shares; (iii) shares of Common Stock issued
upon conversion of, or as a dividend on, the Common Stock; (iv) securities
issued in connection with any joint venture, vendor or customer relationship,
acquisition or merger that is approved by a Majority Interest, provided that
such securities are not issued to a stockholder of the Company or any Affiliate
thereof, or (v) securities issued in connection with the Initial Public Offering
or (vi) shares of Common Stock issued whose proceeds will be used to prepay
amounts due under those certain Convertible Promissory Notes of the Company
acquired by the Investors pursuant to that certain Purchase and Exchange
Agreement dated as of the date hereof.
SECTION VII. REDEMPTION RIGHTS
7.1 OPTIONAL REDEMPTION; REDEMPTION DATE. At any time (the "Redemption
Period") during the first fifteen (15) days of the month of April in the next
fiscal year of the Company following the fiscal year in which the Trigger Event
(as defined below) occurred with respect to a particular Management Stockholder,
such Management Stockholder or the legal representative of such Management
Stockholder's estate, as applicable (each, an "Electing Party"), may elect (an
"Election") to have the Company redeem all (but not less than all) of the Shares
owned by such Management Stockholder or such Management Stockholder's estate, as
applicable (the "Redeemed Shares"). In such event, subject to Section 7.3 below,
the Company shall redeem all (but not less than all) of the Redeemed Shares for
an amount equal to the aggregate Redemption Price specified in Section 7.2. Any
Election pursuant to this Section 7.1 shall be made by written notice (an
"Election Notice") to the Company during the Redemption Period.
7.2 REDEMPTION PRICE. The price for each Redeemed Share redeemed
pursuant to this Section 7 shall be an amount equal to the Fair Market Value (as
defined below) (the "Redemption Price"). Subject to subject to Section 7.3
below, the aggregate Redemption Price shall be payable in one lump sum in cash
to the respective holder of the Redeemed Shares within
14
sixty (60) days of the Company's receipt of an Election Notice (the "Redemption
Date"). The purchase agreement for such transaction shall only require (a)
representations and warranties with respect to good title to the Redeemed Shares
and authority to enter into such agreement and (b) indemnification for damages
arising out of a breach of such representations and warranties.
7.3 LIMITATIONS; INSUFFICIENT FUNDS.
(a) Any provision contained herein to the contrary
notwithstanding, the Company shall not be obligated to redeem or otherwise
purchase or acquire, or make any distribution in respect of, and shall not
redeem, otherwise purchase or acquire or make any distribution in respect of,
any Redeemed Shares to the extent (i) such redemption, purchase, acquisition or
distribution is prohibited or otherwise not permitted under applicable law or
regulation or any agreements, documents or instruments relating to or otherwise
evidencing any outstanding indebtedness for borrowed money of the Company or any
of its subsidiaries or any leases to which such entities are a party ("Debt
Agreements"), (ii) the Company is prohibited from receiving or obtaining, or is
not otherwise permitted to receive, any distributions or dividents from any of
its subsidiaries for such purposes under any such Debt Agreements or (iii)
Available Funds (as defined below) are less than $5,000. No provision of this
Section 7 may be amended or otherwise modified without the prior written consent
of the requisite Lenders as determined by reference to the Credit Agreement.
(b) In the event that Section 7.3(a) is not applicable and only
one Election has been made during a particular Redemption Period, if Available
Funds are insufficient to redeem all of the Shares held by such Electing Party,
the Company shall use any Available Funds to redeem the maximum possible number
of shares.
(c) In the event that Section 7.3(a) is not applicable and more
than one Election has been made during a particular Redemption Period, if
Available Funds are insufficient to redeem all of the Shares held by the
Electing Parties, the Company shall use any Available Funds to redeem the
maximum possible number of shares from the Electing Parties in proportion to the
respective number of shares for which such parties have requested redemption.
(d) In the event that the Company does not redeem all of the
shares requested during any particular Redemption Period, all Elections (to the
extent any Shares are not redeemed) shall survive until the next Redemption
Period (the "Surviving Elections"). Subject to the limitations set forth in
Section 7.3(a), the Company shall satisfy each Surviving Election, on a pro rata
basis based on the number shares remaining unredeemed, prior to satisfying any
newly made Elections during such Redemption Period. With respect to each
Surviving Election, the Fair Market Value for each Redeemed Share shall be equal
to the original Fair Market Value as determined pursuant to the original
Election.
7.4 DEFINITIONS. Terms not otherwise defined in this Section 7 shall
have the following meaning for purposes of this Section 7:
(a) The term "Available Funds" shall mean the difference between
(i) Free Cash Flow and (ii) 1.5 times Adjusted Redemption Funds, where:
15
(i) the term "Free Cash Flow" means EBITDA (as defined in
the Credit Agreement) for the full fiscal year immediately preceding the
Redemption Date (the "Fiscal Year EBITDA"), MINUS the sum of (1) taxes payable
in cash by the Companies for such fiscal year, (2) Capital Expenditures (as
defined in the Credit Agreement) made during such fiscal year with the approval
of the Board of Directors, (3) changes in net working capital of the Companies
for such fiscal year and (4) required principal and interest payments under all
Debt Instruments during such fiscal year;
(ii) the term "Redemption Funds" means any monies that
would be required to fund any redemptions pursuant to all Elections outstanding
with respect to a particular Redemption Period; and
(iii) the term "Adjusted Redemption Funds" means the
largest amount greater than zero and less than or equal to Redemption Funds that
results in the calculation of Available Funds equaling or exceeding $5,000.
(b) The term "Cause" shall mean a vote of the Board of Directors
resolving that the such Management Stockholder should be dismissed as a result
of (i) the commission of any act by the such Management Stockholder constituting
financial dishonesty against the Companies (which act would be chargeable as a
crime under applicable law); (ii) such Management Stockholder's engaging in any
other act of dishonesty, fraud, intentional misrepresentation, moral turpitude,
illegality or harassment which, as determined in good faith by the Board of
Directors, would: (A) materially adversely affect the business or the reputation
of the Companies with its current or prospective customers, suppliers, lenders
and/or other third parties with whom it does or might do business; or (B) expose
the Companies to a risk of civil or criminal legal damages, liabilities or
penalties; (iii) the repeated failure by the such Management Stockholder to
follow the directives of the Companies' chief executive officer or Board of
Directors or (iv) any material misconduct, insubordination, violation of the
Companies' policies, or non-performance of duty by the such Management
Stockholder in connection with the business affairs of the Companies.
(c) The term "Companies" shall mean the Company or any of its
subsidiaries now or hereafter existing.
(d) The term "Disability" shall mean the inability of such
Management Shareholder to perform on a full-time basis the duties and
responsibilities of his employment with the Companies by reason of his illness
or other physical or mental impairment or condition, if such inability continues
for an uninterrupted period of 180 days or more during any 360-day period.
(e) The term "Fair Market Value" shall mean the quotient of (i)
the product of (A) the Fiscal Year EBITDA and (B) 5.5, less all Indebtedness as
of the end of the full fiscal year immediately preceding the Redemption Date and
(ii) the number of outstanding shares of capital stock of the Company on the
Redemption Date on a fully diluted, as converted basis assuming the exercise of
all outstanding option, warrants or other rights to acquire capital stock.
16
(f) The term "Good Reason" shall mean the occurrence of any of
the following events: (i) a substantial adverse change in the nature or scope of
the such Management Stockholder's responsibilities, authorities, powers,
functions or duties; (ii) a reduction in the such Management Stockholder's
annual compensation except for across-the-board compensation reductions
similarly affecting all or substantially all management employees; or (iii) the
relocation of the offices at which the such Management Stockholder is
principally employed to a location more than 50 miles from such offices provided
that such relocation does not involve an employment opportunity with the
Companies with either greater compensation or responsibilities than the position
then held.
(g) The term "Trigger Event" shall mean, with respect to each
particular Management Stockholder that has been employed by the Companies (or
their respective predecessors and successors) for at least thirty-six (36)
months, the earliest to occur of (i) the death of such Management Stockholder
while employed by the Company, (ii) the Disability of such Management
Stockholder while employed by the Company, (iii) the termination by the
Companies of such Management Stockholder's employment with the Companies without
Cause and (iv) the termination by such Management Stockholder of his or her
employment with the Companies for Good Reason.
SECTION VIII. ELECTION OF DIRECTORS
8.1 BOARD COMPOSITION.
(a) COMPANY. Each Stockholder agrees to vote all of his, her or
its Shares having voting power (and any other Shares over which he, she or it
exercises voting control), in connection with the election of Directors and to
take such other actions as are necessary so as to fix the number of directors of
the Company ("Directors") at two (2) and to elect and continue in office as
Directors two (2) persons nominated by ▇▇▇▇▇▇▇ Capital III, L.P. (the "▇▇▇▇▇▇▇
Nominees"), which ▇▇▇▇▇▇▇ Nominees shall initially be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇
▇▇▇▇▇▇▇▇▇▇.
(b) WOODCRAFT INDUSTRIES, INC. For so long as ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
is employed as Chief Executive Officer of Woodcraft Industries, Inc.
("Woodcraft"), the Company agrees to vote its shares of capital stock of
Woodcraft in favor of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ having a seat on the Board of Directors of
Woodcraft.
17
8.2 REMOVAL; VACANCIES. Each Stockholder agrees to vote all of his, her
or its Shares having voting power (and any other Shares over which he, she or it
exercises voting control),or take any other action necessary for the removal of
any Director upon the request of the Persons then entitled to nominate such
Director as set forth in Section 7.1 above, and for the election to the Board of
Directors of a substitute designated by such party in accordance with the
provisions hereof. Each Stockholder further agrees to vote all of his, her or
its Shares having voting power (and any other Shares over which he, she or it
exercises voting control) in such manner or take any other action as shall be
necessary or appropriate to ensure that any vacancy on the Board of Directors
occurring for any reason shall be filled only in accordance with the provisions
of this Section VII.
8.3 COMMITTEES OF THE BOARD. The Board of Directors shall establish (a)
a Compensation Committee (which shall be charged with the exclusive authority
over the granting of stock options and senior management compensation), (b) an
Audit Committee (which shall be charged with reviewing the Company's financial
statements and accounting practices) and (c) such other committees as the Board
of Directors shall deem necessary or convenient from time to time. Except to the
extent otherwise required by applicable law or regulation, or as otherwise
agreed in writing by the ▇▇▇▇▇▇▇ Nominees, each such committee shall include the
▇▇▇▇▇▇▇ Nominees.
8.4 ASSIGNMENT. Each Stockholder agrees, as a condition to any Transfer
of his, her or its Shares, to cause the Transferee to agree to the provisions of
this Section VII, whereupon such Transferee shall be subject to the provisions
hereof to the same extent as the Stockholders in connection with its ownership
of the Shares Transferred.
SECTION IX. MISCELLANEOUS PROVISIONS
9.1 RELIANCE. Each of the parties hereto agrees that each covenant and
agreement made by it in this Agreement or in any certificate, instrument or
other document delivered pursuant to this Agreement is material, shall be deemed
to have been relied upon by the other parties and shall remain operative and in
full force and effect after the date hereof regardless of any investigation.
This Agreement shall not be construed so as to confer any right or benefit upon
any Person other than the parties hereto and their respective successors and
permitted assigns to the extent contemplated herein.
9.2 LEGEND ON SECURITIES. The Company and the Stockholders acknowledge
and agree that in addition to any other legend on the certificates representing
Shares held by them, substantially the following legend shall be typed on each
certificate evidencing any of the Shares held at any time by any of the
Stockholders until such time as the Shares represented by such certificates are
no longer subject to this Agreement:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A CERTAIN
STOCKHOLDERS AGREEMENT, DATED AS OF APRIL ____, 2003, INCLUDING CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY OF SUCH
AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
18
9.3 AMENDMENT AND WAIVER; ACTIONS OF THE BOARD. Any party may waive any
provision hereof intended for its benefit in writing. No failure or delay on the
part of any party hereto in exercising any right, power or remedy hereunder
shall operate as a waiver thereof. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to any
party hereto at law or in equity or otherwise. This Agreement may be amended
with the prior written consent of the Company and a Majority Interest; provided
that any such amendment that adversely affects the Management Stockholders or
the Debt Investors, as applicable, and which affects the Management Stockholders
or the Debt Investors, as applicable, differently than other Stockholders shall
require the prior written consent of a majority-in-interest of the Management
Stockholders or the Debt Investors, as applicable (in each case, based upon the
number of Shares held by the Management Stockholders or the Debt Investors, as
applicable). Notwithstanding anything herein to the contrary, any party that
acquires shares of capital stock of the Company pursuant to Section 1.5 of the
Acquisition Agreement shall, upon executing a joinder agreement to this
Agreement (as contemplated in such Section 1.5), be deemed either an "Investor"
or a "Debt Investor" as determined pursuant to Section 1.5(b) of the Acquisition
Agreement) for all purposes of this Agreement. SCHEDULE A hereto shall be
amended as appropriate to reflect any such acquisitions and/or in the event that
the Investors convert the Notes into Common Stock pursuant to the terms thereto.
9.4 NOTICES. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given, delivered and
received (a) if delivered personally or (b) if sent by facsimile, registered or
certified mail (return receipt requested) postage prepaid, or by courier
providing next day delivery, in each case to the party to whom it is directed,
which if to the Company, shall be at WII Holdings, Inc., c/o Behrman Capital,
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy to
▇▇▇▇▇▇▇ Procter LLP, Exchange Place, Boston, MA 02109, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ and if
to any Investor or Management Stockholder, at the addresses set forth below such
party's signature hereto, (or at such other address for any party as shall be
specified by notice given in accordance with the provisions hereof, provided
that notices of a change of address shall be effective only upon receipt
thereof). Notices delivered personally shall be effective on the day so
delivered, notices sent by registered or certified mail shall be effective five
days after mailing, notices sent by facsimile shall be effective when receipt is
acknowledged, and notices sent by courier providing next day delivery shall be
effective on the earlier of the second business day after timely deposit with
the courier or the day of actual delivery by the courier.
9.5 HEADINGS. The Section headings used or contained in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
9.7 REMEDIES; SEVERABILITY. It is specifically understood and agreed
that any breach of the provisions of this Agreement by any Person subject hereto
will result in irreparable injury to the other parties hereto, that the remedy
at law alone will be an inadequate remedy for such breach, and that, in addition
to any other legal or equitable remedies which they may have, such
19
other parties may enforce their respective rights by actions for specific
performance (to the extent permitted by law) and the Company may refuse to
recognize any unauthorized Transferee as one of its Stockholders for any
purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement.
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
9.8 ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.
9.9 ADJUSTMENTS. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of the
Company.
9.10 LAW GOVERNING. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware without giving
effect to principles of conflicts of law).
9.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto as contemplated herein, and any successor to the Company by way
of merger or otherwise shall specifically agree to be bound by the terms hereof
as a condition of such successor. The rights and obligations of the Investors
hereunder shall be binding upon and inure to the benefit of their permitted
Transferees of their Shares as contemplated herein. This Agreement may not be
assigned by any Management Stockholder or the Debt Investors except as provided
herein, and any attempted Transfer in violation hereof shall be null and void.
Each Transferee of any of the rights or obligations under this Agreement shall
execute and deliver to the Company a Joinder Agreement, without which any such
purported Transfer shall be null and void.
9.12 ARBITRATION OF DISPUTES. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall, to the fullest extent
permitted by law, be settled by arbitration in any forum and form agreed upon by
the parties or, in the absence of such an agreement, under the auspices of the
American Arbitration Association ("AAA") in New York, New York. In the event
that any person or entity other than the parties hereto may be a party with
regard to any such controversy or claim, such controversy or claim shall be
submitted to arbitration subject to such other person or entity's agreement.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. This Section 9.12 shall be specifically
enforceable. Notwithstanding the foregoing, this Section 9.12 shall not preclude
either party from pursuing a court action for the sole purpose of obtaining a
20
temporary restraining order or a preliminary injunction in circumstances in
which such relief is appropriate; provided that any other relief shall be
pursued through an arbitration proceeding pursuant to this Section 9.12.
9.13 CONSENT TO JURISDICTION. To the extent that any court action is
permitted consistent with or to enforce Section 9.12 of this Agreement, the
parties hereby consent to the jurisdiction of the United States District Court
for the Southern District New York. Accordingly, with respect to any such court
action, the Stockholder (a) submits to the personal jurisdiction of such courts;
(b) consents to service of process; and (c) waives any other requirement
(whether imposed by statute, rule of court, or otherwise) with respect to
personal jurisdiction or service of process. process.
9.14 TERMINATION. Sections III, IV, V, VI, VII and Section 9.2 and 9.11
shall terminate upon the Initial Public Offering.
9.15 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement and the other agreements, documents
and instruments executed and delivered in connection herewith with counsel
sophisticated in investment transactions. In the event an ambiguity or question
of intent or interpretation arises, this Agreement and the agreements, documents
and instruments executed and delivered in connection herewith shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement and the agreements, documents and instruments
executed and delivered in connection herewith.
9.16 NO EFFECT UPON LENDING RELATIONSHIPS. Notwithstanding anything
herein to the contrary, nothing contained in this Agreement shall affect, limit
or impair the rights and remedies of the Debt Investors (together with their
successors and assigns, sometimes hereinafter are referred to individually as a
"Subject Investor" and collectively as the "Subject Investors"), any of its
affiliates or any other lender in their capacities as a lender(s) to the Company
or any of its subsidiaries pursuant to any agreement under which the Company or
any of its subsidiaries has borrowed money. Without limiting the generality of
the foregoing, neither any Subject Investor nor any such other Person, in
exercising its rights as a lender, including making its decision on whether to
foreclose on any collateral security, shall have any duty to consider (a) its
status as a direct or indirect equityholder of the Company, (b) the interests of
the Company or any of its subsidiaries or (c) any duty it may have to any other
direct or indirect equityholder of the Company, except as may be required under
the applicable loan documents or by commercial law applicable to creditors
generally.
9.17 FINANCIAL REPORTING. The Company shall furnish to each Investor and
Debt Investor the following reports:
(a) ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after
the end of each fiscal year of the Company, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of such fiscal year and the
related consolidated statements of income, stockholders' equity and cash flows
for the fiscal year then ended, prepared in accordance with generally accepted
accounting principles and certified by a firm of independent
21
public accountants of recognized national standing selected by the Board of
Directors of the Company;
(b) QUARTERLY FINANCIAL STATEMENTS. Within thirty (30) days after
the end of each fiscal quarter in each fiscal year (other than the last fiscal
quarter in each fiscal year), a consolidated balance sheet of the Company and
its subsidiaries, if any, and the related consolidated statements of income,
stockholders' equity and cash flows, unaudited but prepared in accordance with
generally accepted accounting principles and certified by the Chief Financial
Officer of the Company, such consolidated balance sheet to be as of the end of
such month and such consolidated statements of income, stockholders' equity and
cash flows to be for such quarter and for the period from the beginning of the
fiscal year to the end of such quarter, in each case with comparative statements
for the prior fiscal year.
9.18 VOTING OF NONVOTING COMMON STOCK. Each holder of Nonvoting Common
hereby acknowledges that the terms of the Charter provide that the holders of
Nonvoting Common, except as required by Section 242(b)(2) of the Delaware
General Corporation Law ("Applicable Law"), shall not be entitled to vote on any
matters submitted to the vote of the stockholders of the Company. In the event
that the holders of Nonvoting Common are entitled to a class vote otherwise
under Applicable Law, each holder of Nonvoting Common hereby irrevocably and
unconditionally agrees to vote or cause to be voted all shares of Nonvoting
Common held by such holder as of the date hereof and in the future in a manner
consistent with, and in the same proportion as, the holders of Voting Common
Stock vote (or would have voted, if applicable, as determined in good faith by
the holders of a majority fo the shares of Voting Common Stock) such shares on
all matters submitted to a vote of stockholders for which such holders of
Nonvoting Common are entitled to vote.
[SIGNATURE PAGES FOLLOW]
22
IN WITNESS WHEREOF, the parties hereto have caused this
Stockholders
Agreement to be duly executed as of the date first set forth above.
COMPANY:
WII HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
STOCKHOLDERS:
▇▇▇▇▇▇▇ CAPITAL III L.P.
By: ▇▇▇▇▇▇▇ Brothers III L.L.C., its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
STRATEGIC ENTREPRENEUR FUND III L.P.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
Address:
c/o Behrman Capital
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇ Procter LLP
Exchange Place
Boston, MA 02109
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
STOCKHOLDERS:
ANTARES CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Portfolio Manager - Woodcraft Industries
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
STOCKHOLDERS:
INDOSUEZ CAPITAL PARTNERS 2003, LLC
By: Indosuez CMII, Inc., its Managing General
Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice-President
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------
Name:▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: General Manager
STOCKHOLDERS
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Address:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address:
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Address:
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Address:
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Address:
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Schedule A