Exhibit 10.14
EXECUTION DRAFT
CONTRIBUTION AGREEMENT
This Agreement, dated as of October 21, 2003, by and among Norcraft
Holdings, L.P., a Delaware limited partnership f/k/a Norcraft Holdings, L.L.C.
("Holdings"), Norcraft Companies, L.P., a Delaware limited partnership f/k/a
Norcraft Companies, L.L.C. ("Norcraft"), Xxxxxx Norcraft Holdings, L.L.C., a
Delaware limited liability company (the "Xxxxxx Investor"), and Xxxx Xxxxxx (the
"Executive"), Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx and Xxxx
Xxxxxx (together with the Executive, the "Xxxxxx Family Members").
A. Holdings is a party to the Unit Purchase Agreement, dated as of
August 29, 2003, with Norcraft and the unitholders of Norcraft set forth
therein, pursuant to which Holdings agreed to purchase all of the issued and
outstanding membership units of Norcraft (the "Acquisition");
B. The Xxxxxx Family Members are the owners of all of the outstanding
equity interests of Norcraft Canada Corporation, a Nova Scotia unlimited
liability company (the "Canadian Subsidiary"), which is to be contributed to
Norcraft as part of the Acquisition;
C. The Canadian Subsidiary is the sole owner of the real property
located at Xxxxxxxxxxx Xxxx xxx Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx, including all
structures, fixtures and other rights attached thereto and more specifically
described on Schedule I hereto (the "Winnipeg Facility"), which facility will be
used by Norcraft as part of its ongoing business following consummation of the
Acquisition;
D. Upon consummation of the Acquisition, will enter into an Employment
Agreement (the "Employment Agreement") with the Executive pursuant to which the
Executive will serve as Chief Executive Officer and Vice Chairman of Holdings
and Norcraft; and
E. The parties have entered into this Agreement to provide for the
contribution referred to herein, to provide the Xxxxxx Investor with certain
additional payments and rights to purchase additional limited partnership units
in Holdings upon certain events constituting a Change of Control (as defined in
the Limited Partnership Agreement of Holdings, of even date herewith, the "LP
Agreement"), and to provide for certain additional agreements referred to
herein;
In consideration of the mutual promises set forth herein, the parties
agree as follows:
1. Contribution and Consideration.
a. Upon the terms and conditions hereinafter set forth, the
Xxxxxx Family Members shall contribute to Norcraft, and Norcraft shall accept as
a contribution to Norcraft, all of the outstanding equity interests of the
Canadian Subsidiary.
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b. Immediately upon receipt by Norcraft of the contribution
referred to in Section 1.a, the Xxxxxx Family Members shall be entitled to
receive limited partnership units in Norcraft. By execution hereof, the Xxxxxx
Family Members assign their rights to receive such units to the Xxxxxx Investor,
which will, immediately upon receipt of such units, execute and deliver the LP
Agreement and exchange such units for an aggregate 2,967,429 Series A-2 Units,
all in consideration for such contribution by the Xxxxxx Family Members.
2. Change of Control Bonus. If a Triggering Event occurs, the Xxxxxx
Investor shall be entitled to receive an aggregate of U.S. $4,000,000 (the
"Change of Control Bonus") from Holdings, provided that, after giving effect to
the Change of Control Bonus, (i) the IRR on the Sponsor Units as of the
Triggering Event is at least 20% and (ii) Proceeds in connection with the
Triggering Event are at least an amount that is 2.5 times the aggregate amount
of cash paid by the Sponsors for the Sponsor Units. The Change of Control Bonus
shall be paid by certified bank check or wire transfer at the effective time of
the Triggering Event.
3. Purchase Right. Upon consummation of a Triggering Event, the Xxxxxx
Investor shall be entitled, at its sole option and expense, to purchase (the
"Purchase Right") up to 1,478,553.86 Series A-2 Units for U.S. $3.00 per unit,
and up to an additional 1,478,553.86 Series A-2 Units for U.S. $3.50 per unit.
Any exercise of the Purchase Right will be made by the Xxxxxx Investor upon
notice to Holdings delivered at least three (3) days prior to the scheduled
effective time of the Triggering Event, with the closing of the exercised
Purchase Right to occur at the effective time of the Triggering Event. At the
closing of the Purchase Right, the aggregate purchase price for the Series A-2
Units shall be paid by the Xxxxxx Investor, at its option, in cash, by certified
bank check or wire transfer, or, if practicable, upon a "cashless basis,"
whereby the Xxxxxx Investor will, in lieu of a cash payment of such purchase
price, receive from Holdings the amount of Series A-2 Units equal to the amount
of units otherwise issuable upon such exercise less the amount of Series A-2
Units having a Fair Market Value on the closing date equal to the aggregate
purchase price applicable to the entire amount of units for which the Purchase
Right was exercised by the Xxxxxx Investor. The number of units subject to the
Purchase Right and the purchase price therefore are subject to proportional
adjustment in the event of any subdivision or combination of the Series A-2
Units or merger, consolidation or recapitalization of Holdings.
4. Expiration. The provisions of Section 2 and 3 of this Agreement
shall expire and be of no further force or effect immediately upon the earlier
to occur of (i) the consummation of a Change of Control, whether or not such
Change of Control constitutes a Triggering Event; provided, that if such Change
of Control is a Triggering Event pursuant to which the Xxxxxx Investor shall be
entitled to receive the Change of Control Bonus or shall have exercised the
Purchase Right, in accordance with Section 2 and 3 of this Agreement,
respectively, the right to receive the Change of Control Bonus or receive Series
A-2 Units pursuant to such exercise of the Purchase Right shall survive the
expiration of this Agreement; (ii) six months after the termination of the
Executive's employment by Holdings other than for Cause (as defined in the
Employment Agreement) or by the Executive for Good Reason (as defined in the
Employment Agreement); and (iii) any other termination of the Executive's
employment with Holdings other than in connection with a Triggering Event.
5. Determination. The determination of whether a Triggering Event has
occurred, the IRR and the amount of the Proceeds received for the Sponsor Units
shall be made in good faith
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by the board of managers of the general partner of Holdings (or similar
governing body) and shall be final and binding on the Xxxxxx Investor and
Holdings.
6. Representations of the Xxxxxx Investor and the Xxxxxx Family
Members. The Xxxxxx Investor and each Xxxxxx Family Member represents and
warrants to Norcraft and to Holdings as follows:
a. The Xxxxxx Investor is a limited liability company organized,
validly existing and in good standing under the laws of the State of Delaware.
The Xxxxxx Investor has full power and authority under the Delaware Limited
Liability Company Act and its operating agreement to execute, deliver and
perform this Agreement and to consummate the transactions contemplate herein,
and no further actions or proceedings or consents of any governmental or other
third parties are necessary to authorize such execution, delivery and
performance hereunder. This Agreement, when executed and delivered by the Xxxxxx
Investor will constitute a valid, binding obligation of the Xxxxxx Investor,
enforceable against it in accordance with its terms, except as such obligation
and enforceability may be limited by applicable bankruptcy and other similar
laws affecting the enforcement of creditors' rights generally.
b. The Xxxxxx Family Members own 100% of the outstanding equity
interests of the Xxxxxx Investor in proportion to their respective Percentage
Interests.
c. The Xxxxxx Family Members have good, absolute and marketable
title to 100% of the outstanding equity interests of the Canadian Subsidiary,
free and clear of all mortgages, liens, claims and encumbrances.
d. The aggregate expenditures actually paid to third parties, in
U.S. dollars, by the Xxxxxx Family Members or their Affiliates in connection
with their investment in the Canadian Subsidiary and the Winnipeg Facility and
their due diligence investigation of Raywal Limited, are as set forth, in
reasonable detail, on Schedule II hereto.
e. The Canadian Subsidiary is an unlimited liability company duly
organized, validly existing and in good standing under the laws of Nova Scotia
and has all necessary power and authority to own all of its properties and
assets. The only asset of the Canadian Subsidiary is the Winnipeg Facility,
which it owns free and clear of all mortgages, liens, claims and encumbrances,
other than customary development agreements with which the property is in full
compliance. Other than the Winnipeg Facility, the Canadian Subsidiary has never
held any other assets and has not engaged in any other business. The Canadian
Subsidiary has no liabilities or obligations of any kind except as set forth on
Schedule III hereto.
f. The execution and delivery by the Xxxxxx Investor and each
Xxxxxx Family Member of this Agreement does not and the consummation of the
transactions contemplated hereby will not (i) result in a default (or give rise
to any right of termination, cancellation or acceleration) under the terms,
conditions, or provisions of any contractual obligation to which the Xxxxxx
Investor, a Xxxxxx Family Member or the Canadian Subsidiary is a party, or may
be bound; or (ii) violate any law, statute, rule or regulation, or any published
order, judgment or decree, of any governmental authority applicable to the
Xxxxxx Investor, a Xxxxxx Family Member or the Canadian Subsidiary.
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7. Covenants of the Xxxxxx Family Members.
a. Each of the Xxxxxx Family Members hereby covenants and agrees
to maintain a, direct or indirect, beneficial ownership interest in all of the
outstanding equity interests of the Xxxxxx Investor in accordance with their
respective Percentage Interest; provided, that the foregoing covenant shall not
apply to any changes in such proportionate beneficial ownership in connection
with Transfers by a Xxxxxx Family Member which would have been permitted by the
LP Agreement if the Xxxxxx Family Member had been a Limited Partner of Holdings
thereunder.
b. Each Xxxxxx Family Member hereby covenants and agrees that
except as the General Partner may expressly authorize or direct in writing, he
shall not, while the Executive is employed by Holdings or any of its
Subsidiaries and for the two-year period following termination of the
Executive's employment with Holdings and its Subsidiaries, directly or
indirectly, (i) own, manage, operate, join, or control (or participate in the
ownership, management, operation or control of), any corporation, company,
association, partnership, limited liability company, proprietorship or other
business entity that, within the North America, engages in the business of
manufacturing, marketing or selling branded cabinet business, (ii) serve as an
employee, agent, consultant, officer, director, manager, partner or
representative of any such business entity or enterprise described immediately
above in clause (i), or (iii) hire or otherwise seek to induce, or assist any
other person from hiring or otherwise seeking to induce, employees of Holdings
or any of its Subsidiaries to terminate their employment; provided that the
foregoing shall not prevent any Xxxxxx Family Member from owning 5% or less of
the publicly-traded equity securities of any company or prevent any Xxxxxx
Family Member other than the Executive from entering into the cabinet component
or door manufacturing business during the two-year period following termination
of the Executive's employment with the Holdings and its Subsidiaries.
c. Each Xxxxxx Family Member acknowledges that the restrictions
stated in Section 7.b are reasonable and the covenant is necessary to protect
Holdings' interests. If, however, a court of competent jurisdiction, at the time
of enforcement, shall deem the restrictions as stated in Section 7.b to be
unreasonable as to the duration, scope, or area of restriction, then such
restrictions may be applied only to such activities and territory and only for
such period of time as the court determines to be reasonable in light of all the
circumstances then existing, with such determination by the court to be binding
on Holdings and such Xxxxxx Family Member.
8. Definitions. For the purposes of this Agreement, capitalized terms
which are not otherwise defined herein have the meanings assigned to such terms
in the LP Agreement. In addition to those terms defined elsewhere in this
Agreement, the following terms have the following meanings:
"IRR" shall mean the internal annual rate of return, calculated in a
manner consistent with the "IRR" function in Microsoft Corporation's Excel
spreadsheet software (based on a year of twelve thirty-day months), realized (or
deemed to be realized) by the Sponsors on the Sponsor Units, such rate of return
to be calculated on (i) the cash outflow consisting of the aggregate cash paid
by the Sponsors for the Sponsor Units and (ii) the series of cash inflows
consisting of all amounts realized by the Sponsors in respect of the Sponsor
Units other than in respect of Tax Distributions. For purposes of such
calculation, (A) the cash outflow and each cash inflow shall be
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deemed to have occurred on the last day of the calendar month in which it
occurred, and (B) an amount shall not be treated as a cash inflow unless and
until actually received in cash.
"Percentage Interest" shall mean, with respect to each of the
Executive, Xxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxx, 19.35%, and, with respect
to each of Xxxx Xxxxxx and Xxxx Xxxxxx, 11.30%.
"Proceeds" shall mean net cash proceeds realized by the Sponsors in
respect of the sale of the Sponsor Units (or realized in respect of the sale of
securities acquired in respect of the sale of Sponsor Units).
"Sponsors" shall mean the investors in the original SKM Limited
Partner and the original TCP Limited Partner.
"Sponsor Units" shall mean the Class A Units purchased by the original
SKM Limited Partner and the original TCP Limited Partner, together with any
other securities of Holdings issued upon conversion thereof or in exchange
therefore.
"Triggering Event" shall mean a Change of Control that (i) results in
the termination of the Executive's employment with Holdings at the effective
time of a Change of Control at the request of the applicable Change of Control
Transferee, or (ii) is consummated within the six month period immediately
following the termination of the Executive's employment by Holdings other than
for Cause (as defined in the Employment Agreement) or by the Executive for Good
Reason (as defined in the Employment Agreement).
9. General Provisions.
a. This Agreement and the rights and obligations hereunder shall
not be assignable or transferable by Holdings, Norcraft, the Xxxxxx Investor or
the Xxxxxx Family Members without the prior written consent of Holdings and the
Xxxxxx Investor; provided, that the Xxxxxx Investor may assign its rights
pursuant to Sections 2 and 3 of this Agreement to a Permitted Transferee who
receives Series A-2 Units from the Xxxxxx Investor in connection with a Transfer
permitted by the LP Agreement. Any attempted assignment in violation of this
paragraph shall be void.
b. This Agreement may not be amended and no provision may be
waived except by an instrument in writing signed on behalf of Holdings and the
Xxxxxx Investor.
c. All notices, reports or other communications required or
permitted to be given hereunder shall be made in the manner set forth in Section
22.4 of the LP Agreement.
d. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
e. This Agreement and the LP Agreement contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all
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prior agreements and understandings relating to such subject matter. Neither
party shall be liable or bound to any other party in any manner relating to such
subject matter except as specifically set forth herein.
f. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of Delaware without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
g. The provisions of Section 21.2, Section 21.3, Section 21.4,
Section 22.2, Section 22.3 and Section 22.6 of the LP Agreement shall also be
applicable to the parties hereto for purposes of this Agreement and such
provisions are incorporated herein by reference, mutatis mutandis, as if stated
in their entirety herein.
* * * * *
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In witness whereof, Holdings, Norcraft, the Xxxxxx Investor and the
Xxxxxx Family Members have duly executed this Agreement as of the date first
written above.
NORCRAFT HOLDINGS, L.P.
By: Its General Partner
NORCRAFT GP, L.L.C.
By: /s/ Xxxxx Xxxxxx
-----------------------------
Name: Xxxxx Xxxxxx
Title: Authorized Person
NORCRAFT COMPANIES, L.P.
By: Its General Partner
-----------------------------
NORCRAFT GP, L.L.C.
By: /s/ Xxxxx Xxxxxx
-----------------------------
Name: Xxxxx Xxxxxx
Title: Authorized Person
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/s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
/s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
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/s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
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XXXXXX NORCRAFT HOLDINGS, L.L.C.
By: /s/ Xxxx Xxxxxx
-----------------------------
Name: Xxxx Xxxxxx
Title: Managing Member
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SCHEDULE I
Description of Winnipeg Facility
Xxx 0 Xxxx 00000 WLTO in NE 1/4 17-11-4 EPM Winnipeg, Manitoba
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SCHEDULE II
Expenditures of the Xxxxxx Investor
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Norcraft Canada Corporation
Record of Bank Transactions
May 1, 2003 to October 15, 2003
Date Payee/Payor Cheque Deposit Balance
------------ ------------------------------ ------------ ------------ ------------
May 22/03 MEB2 Holdings 200,000.00 200,000.00
May 30/03 O/D interest 29.23 199,970.07
May 21/03 Concorde 43,338.03 156,632.04
June 18/03 Great West Life 700.00 155,932.04
June 18/03 Aon Xxxx Xxxxxxxxx 23,380.00 132,552.04
June 18/03 Xxxxxxx Xxxx 6,066.95 126,485.09
June 30/03 Concorde 353,097.72 - 226,612.63
June 27/03 Ernst & Young 1,187.70 - 227,800.33
June 30/03 PCB2 Holdings 100,000.00 - 127,800.33
June 30/03 JWB2 Holdings 300,000.00 172,199.67
June 11/03 Payroll 6,857.43 165,342.24
June 25/03 Payroll 2,600.93 162,741.31
June 25/03 Bank charges 88.96 162,652.35
July 2/03 FC Machinery 24,291.00 138,361.35
July 9/03 Payroll 2,600.93 135,760.42
July 23/03 PCB2 Holdings 200,000.00 335,760.42
July 23/03 DHB2 Holdings 300,000.00 635,760.42
July 23/03 Payroll 2,600.93 633,159.49
July 23/03 Concorde 396,618.03 236,541.46
July 23/03 Aon Xxxx Xxxxxxxxx 850.00 235,691.46
August 6/03 Payroll 2,600.93 233,090.53
August 20/03 Payroll 2,600.93 230,489.60
August 26/03 Xxxxxx, XxxXxxxx & Thorvaldson 14,269.63 216,219.97
August 26/03 Xxxxxx, XxxXxxxx & Xxxxxxxxxxx 98,397.88 117,822.09
August 27/03 PCB2 Holdings 300,000.00 417,822.09
August 27/03 JWB2 Holdings 300,000.00 717,822.09
August 29/03 DHB2 Holdings 300,000.00 1,017,822.09
August 29/03 HEB2 Holdings 200,000.00 1,217,822.09
August 29/03 MEB2 Holdings 300,000.00 1,517,822.09
August 29/03 Concorde 689,178.76 828,643.33
August 29/03 Ernst & Young 103,455.10 725,188.23
Sept. 02/03 Ernst & Young 1,781.55 723,406.68
Sept. 03/03 Payroll 2,600.93 720,805.75
Sept. 05/03 Xxxxxx, XxxXxxxx & Xxxxxxxxxxx 2,514.38 718,291.37
Sept. 17/03 Payroll 2,624.90 715,666.47
Sept. 22/03 Xxxxxxx Xxxx 168.26 715,498.21
Sept. 23/03 JWB2 Holdings 250,000.00 965,498.21
Sept. 23/03 DHB2 Holdings 250,000.00 1,215,498.21
Sept. 23/03 MEB2 Holdigns 250,000.00 1,465,498.21
Sept. 23/03 PCB2 Holdings 250,000.00 1,715,498.21
Sept. 25/03 Concorde 941,736.58 773,761.63
Sept. 30/03 Great West Life 2,114.00 771,647.63
Oct Cunninghams 10,000.00 761,647.63
Oct Xxxxx Xxxxxx 782.43 760,865.20
Oct Concorde 501,028.69 259,836.51
Oct Payroll 2,624.51 257,212.00
Oct Xxxxxxx Xxxx 737.01 256,479.99
Oct Aqua Teree Solutions 3,745.00 252,729.99
Oct FC Machiniery 44,460.00 208,269.99
Oct FC Machiniery 161,057.39 47,212.60
Oct Xxxxxx, XxxXxxxx & Xxxxxxxxxxx 4,639.79 42,572.81
Oct Xxxx Xxxxxx 11,355.25 31,217.56
Oct Xxxx Xxxxxx 401.93 30,815.63
Oct Xxxxx Xxxxxx 3,506.97 27,308.66
Oct Xxxxx Xxxxxx 421.47 26,887.19
Add land purchased directly by Xxxx Xxxxxx 403,059.00 403,059.00
------------ ------------
3,876,171.81 3,903,059.00
------------ ------------
US$ 2,967,428.72
============ ============
(Exchange Rate = 1.3153)
SCHEDULE III
Liabilities and Obligations
of the Canadian Subsidiary
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SCHEDULE III
List of Obligations in respect of Winnipeg Facility
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Description of Obligation Estimated Amount
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1. Fixed price contract with Concord $3,300,000.00
Projects dated February 25, 2003, for The payments made to date are
construction of facility outlined in Schedule II
------------------------------------------------------------------------
2. Contract with Cunninghams Business $42,000
Interiors Ltd. for supply of office
furniture
------------------------------------------------------------------------
3. Contract with Manitoba Telecom $20,000
Services Inc. For the supply of a phone
system
------------------------------------------------------------------------
4. Contract with Clear Concepts Inc. for $75,000
supply of computer system (including
software)
------------------------------------------------------------------------
5. Engagement with Ernst & Young for $25,000
accounting services
------------------------------------------------------------------------
6. Engagement with Xxxxxx, XxxXxxxx As per invoice
& Thorvaldson for legal services
------------------------------------------------------------------------
7. Contract with Air Unlimited for $18,000
supply of compressed air
------------------------------------------------------------------------
8. Contract with Xxxxx Woodwork for air $16,000
compressor
------------------------------------------------------------------------
9. Contract with Concord Projects for $16,000
supply of water softener
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