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STOCKHOLDERS AGREEMENT
Dated as of December __, 2004
By and Among
AMH HOLDINGS II, INC.
and
THE STOCKHOLDERS SIGNATORY HERETO
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STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of December
__, 2004, by and among AMH Holdings II, Inc., a Delaware corporation (the
"Company"), Harvest Partners III, L.P., a Delaware limited partnership, Harvest
Partners III Beteiligungsgesellschaft Burgerlichen Rechts (mit
Haftungsbeschrankung), a German limited liability partnership, Harvest Partners
IV, L.P., a Delaware limited partnership, and Harvest Partners IV GmbH & Co. KG,
a German limited partnership, (each, a "Harvest Fund" and, collectively, the
"Harvest Funds"), the holders of Preferred Stock set forth on Schedule I
attached hereto each such holder individually a "Preferred Holder," and
collectively, the "Preferred Holders"), the financial investors listed on
Schedule II attached hereto (each, a "Financial Investor" and, collectively, the
"Financial Investors"), certain stockholders of the Company listed on the
Executive Signature Page hereto (collectively, the "Executives") and, for
purposes of Section 4.2 of this Agreement, Apollo Investment Corporation
("Apollo").
W I T N E S S E T H :
WHEREAS, the Company, AMH Holdings, Inc. ("Holdings") and the
Stockholders have entered into the Restructuring Agreement, dated as of the date
hereof, pursuant to which the Company will effect a restructuring upon the terms
and subject to the satisfaction or waiver of the conditions set forth therein
(the "Restructuring") and, among other things, amend the Company's Certificate
of Incorporation to include a Certificate of Designations authorizing the
issuance of the Preferred Stock, as amended from time to time (the "Certificate
of Designations");
WHEREAS, this Agreement is being entered into pursuant to the
Restructuring and the Stock Purchase Agreement dated as of December __, 2004, by
and among Holdings, Harvest Partners, Inc., a New York corporation, and the
other parties signatory thereto (the "Stock Purchase Agreement");
WHEREAS, the Stockholders own the Preferred Stock and the Common Stock
in the amounts set forth on Schedule III attached hereto;
WHEREAS, (i) the Company has adopted a Stock Option Plan (as defined
below), and (ii) Holdings has in place its AMH Holdings, Inc. 2004 Stock Option
Plan (the "Holdings Plan"), in each case for certain members of management and
key employees of the Company and its subsidiaries, and pursuant to such plans
any Equity Securities (including shares of common stock issuable under the
Holdings Plan and immediately exchangeable for shares of Common Stock (as
defined below) of the Company) issuable upon exercise of the Stock Options (as
defined below) shall be subject to, and have the benefit of, the terms of this
Agreement to the extent expressly provided for herein;
WHEREAS, Holdings and the Existing Investors are party to an Amended
and Restated Stockholders Agreement (the "Holdings Stockholders Agreement"),
dated as of March 4, 2004, which Holdings and the Existing Investors desire to
terminate herewith; and
WHEREAS, the Company and the Stockholders each desire to enter into
this Agreement to, inter alia, regulate and limit certain rights relating to the
Equity Securities and to limit the sale, assignment, transfer, encumbrance or
other disposition of such Equity Securities and to provide for the consistent
and uniform management of the Company as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Adjusted Cash Flow" shall mean, for any period, (a) the EBITDA of the
Company and its Subsidiaries for such period less (b) capital expenditures
(as determined in accordance with GAAP) of the Company and its Subsidiaries
for such period.
"Affiliate" shall mean, with respect to any Person, any other Person
(a) directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person, (b) with respect to Xxxxxx
Capital Private Equity Fund III, L.P., GE Capital Equity Capital Group,
Inc. and Private Equity Portfolio Fund II, LLC, advised or managed by, such
Person and (c) with respect to any Investcorp Investors, with whom
Investcorp S.A. or any Affiliate thereof has any administrative
relationship with respect to securities of the Company. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Aggregate Liquidation Preference Amount" shall have the meaning set
forth in the Certificate of Designations.
"AMHI" shall have the meaning set forth in Section 4.1(a) of this
Agreement.
"Apollo" shall have the meaning set forth in the preamble to this
Agreement.
"Applicable Law" shall mean, with respect to any Person, all
provisions of laws, statutes, ordinances, rules, regulations, permits or
certificates of any Governmental Authority applicable to such Person or any
of its assets or property, and all judgments, injunctions, orders and
decrees of all courts, arbitrators or Governmental Authorities in
proceedings or actions in which such Person is a party or by which any of
its assets or properties are bound.
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"Approved Recapitalization" shall mean any Recapitalization:
(a) that occurs after the date that is thirty-two (32) months
after the date hereof,
(b) that does not result in (x) the projected annual blended cost
of funds under the Company's consolidated indebtedness for the period
after the closing date of the Recapitalization (including interest and
fees, but excluding legal fees and other similar costs of issuance,
with (i) interest of floating rate indebtedness being deemed equal to
the interest rate (or if there is an option of several floating rates,
such as one or more "LIBOR" and "Base" rates, the lowest rate) in
effect on the date of the commitment (or if there is no commitment,
the date of the proposal letter) for the related bank financing, in
each case taking into consideration the maximum rate of interest that
would be charged under any "market flex" provision contained therein
except as provided below (the "Determination Date"), (ii) upfront fees
being amortized over the term of such indebtedness and (iii) the
principal amount of revolving indebtedness being deemed equal to the
principal amount projected to be outstanding on the closing date of
the Recapitalization), being in excess of (y) the annual blended cost
of funds of the Company's consolidated indebtedness (with upfront fees
paid in connection therewith treated on a basis consistent with clause
(ii) of the parenthetical in the foregoing clause (x)) for the period
of four consecutive fiscal quarters ended most recently prior to the
Determination Date,
(c) that does not result in the ratio of (i) consolidated
indebtedness of the Company as of the closing date of the
Recapitalization, net of cash and cash equivalents of the Company and
its Subsidiaries, to (ii) Bank Adjusted EBITDA of the Company and its
Subsidiaries for the period of twelve (12) consecutive monthly fiscal
periods ended most recently prior to the closing date of the
Recapitalization for which financial statements are available,
exceeding five (5) to one (1),
(d) in which any new indebtedness incurred in connection
therewith (including under any amended, or amended and restated
financing) shall be on terms and conditions (other than those
addressed in clause (b) above) that, taken as a whole, are not less
favorable in all material respects to the Company and its Subsidiaries
than the indebtedness of the Company and its Subsidiaries immediately
prior to such Recapitalization, and
(e) the net proceeds of which are applied, pursuant to Section
4.7, to the repurchase of Equity Securities.
Notwithstanding clause (b) above, at the election of the Investcorp
Investors (in the case of any Recapitalization pursuant to Section 4.4) or
the Harvest Funds (in the case of any Recapitalization pursuant to Section
4.5) (each being the "Initiating Investor"), the Initiating Investor may
exclude from the determination under clause (b) above any interest payable
pursuant to any "market flex" provision on the Determination Date. In
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any such case, the relevant Recapitalization shall be considered an
Approved Recapitalization for all purposes of this Agreement. However, in
any such case, upon the signing of the relevant definitive credit
documentation, the determination under clause (b) shall be remade as of the
date of such signing (considering such date of signing to be the
"Determination Date" for purposes of such clause). If the test specified in
clause (b) is not satisfied at such time, notwithstanding anything in
Section 4.4 or 4.5, as applicable, to the contrary, the Initiating Investor
shall not have the right to cause such Recapitalization to be consummated
except if such Recapitalization is approved by a Special Board Approval.
"Associated" shall have the meaning set forth in Section 4.1(a) of
this Agreement.
"Bank Adjusted EBITDA" shall mean, for any period and with respect to
any Approved Recapitalization, the earnings before interest, taxes,
depreciation and amortization of the Company and its Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, subject
to such additional add-backs, reductions and other adjustments as are
permitted or required for purposes of determining compliance with the
leverage covenant (i.e., debt or senior debt to "EBITDA" (or its
equivalent) covenant or, if there is no leverage covenant, any coverage
ratio covenant) under the largest bank credit facility of the Company and
its Subsidiaries in effect on the closing date of such Approved
Recapitalization.
"Base Amount" shall have the meaning set forth in the definition of
"Projected Adjusted Cash Flow."
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day except a Saturday, a Sunday or any
other day on which commercial banks in New York, New York are required or
authorized by Applicable Law to close.
"Capital Stock" shall mean:
(a) in the case of a corporation, corporate stock (including
common and preferred stock);
(b) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(c) in the case of an association or other business entity, any
and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock.
As used herein, unless the context otherwise requires, "Capital Stock"
shall refer to the capital stock of the Company.
"Certificate of Designations" shall have the meaning set forth in the
recitals to this Agreement.
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"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Company, as amended from time to time.
"Change of Control Transaction" shall mean any transaction or series
of related transactions that (i) results in the sale or transfer (whether
by stock sale, merger, exchange or otherwise) of fifty percent (50%) or
more of the Equity Securities or the voting power of the Voting Stock of
the Company other than a Drag Along Event initiated pursuant to Section
2.4(a)(i), Section 4.4(b) or Section 4.6 or (ii) results in a "Change of
Control" under the Indentures.
"Class A Series I Common Stock" shall mean the Class A Series I
(Voting) Common Stock of the Company, par value $0.01 per share.
"Class A Series II Common Stock" shall mean the Class A Series II
(Non-Voting) Common Stock of the Company, par value $0.01 per share.
"Class B Series I Common Stock" shall mean the Class B Series I
(Voting) Common Stock of the Company, par value $0.01 per share.
"Class B Series II Common Stock" shall mean the Class B Series II
(Non-Voting) Common Stock of the Company, par value $0.01 per share.
"Common Stock" shall mean the Class A Series I Common Stock, the Class
A Series II Common Stock, Class B Series I Common Stock and the Class B
Series II Common Stock.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Company Recap Event" shall have the meaning set forth in Section
4.7(b)(i) of this Agreement.
"Demand Notice" shall have the meaning set forth in Section 3.1(b) of
this Agreement.
"Demand Request" shall have the meaning set forth in Section 3.1(a) of
this Agreement.
"Designated Options" shall mean the options to purchase the shares of
common stock of Holdings that have been granted to the persons and in the
amounts set forth on Exhibit A hereto. For purposes of various calculations
contained in this Agreement, the number of Designated Options as of any
date of determination will be the number of such options that remain
outstanding on such applicable date of determination (giving effect to any
adjustments in such number of options, for stock splits, stock
distributions, and the like, as dictated by the plan documents).
"Designated Sale Event" shall mean any transaction or series of
related transactions that would result in the sale of fifteen percent (15%)
or more of the Equity
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Securities of the Company (calculated by assuming conversion of the
Preferred Stock into Common Stock).
"Determination Date" shall have the meaning set forth in the
definition of "Approved Recapitalization."
"Director" shall mean a member of the Board.
"Drag Along Event" shall mean a transaction or series of related
transactions that would result in the sale of 100% of the Equity Securities
of the Company for cash to a Person that is not an Affiliate of any Drag
Seller.
"Drag Seller" shall have the meaning set forth in Section 2.4(a) of
this Agreement.
"EBITDA" shall mean, for any period and any Person, "EBITDA" (as
defined in Associated's Amended and Restated Credit Agreement dated as of
August 29, 2003, as amended by a First Amendment thereto dated as of March
18, 2004) for such period.
"Equity Securities" shall mean, as of any applicable date of
determination, the shares of Capital Stock of the Company outstanding as of
such date of determination.
"Equity Value" shall mean, as of any applicable date of determination,
the total fair market value of the Equity Securities of the Company
determined in accordance with the applicable provisions of this Agreement.
"Excess New Securities" shall have the meaning set forth in Section
2.5(a) of this Agreement.
"Excess Participants" shall have the meaning set forth in Section
2.3(b) of this Agreement.
"Excess Tag Securities" shall have the meaning set forth in Section
2.3(b) of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Executives" shall have the meaning set forth in the preamble to this
Agreement.
"Executive Officer" shall have the meaning given to such term in Rule
3b-7 under the Exchange Act, as the same may be amended from time to time.
"Existing Investors" shall mean, as of any applicable date of
determination, the Harvest Funds, the Financial Investors and the
Executives, and their respective Permitted Transferees, in each case who
hold Equity Securities of the Company as of such date of determination.
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"Existing Investor Recap Event" shall have the meaning set forth in
Section 4.7(b)(iii) of this Agreement.
"Fall-Away Governance Rights" shall have the meaning set forth in
Section 4.3 of this Agreement.
"Financial Investor" and "Financial Investors" shall have the meanings
set forth in the preamble to this Agreement as updated pursuant to Section
2.2(c), in each case who hold as of such date of determination Equity
Securities of the Company.
"First Valuation" shall have the meaning set forth in Section 4.5(a)
of this Agreement.
"GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time, including those set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession. Except as otherwise expressly
provided herein, all ratios and computations based on GAAP contained in
this Agreement shall be computed in conformity with GAAP as in effect from
time to time.
"Governmental Authority" shall mean any U.S. or non-U.S. federal,
state, municipal or other governmental department, board, bureau, agency or
instrumentality, or any court.
"Harvest Fund" and "Harvest Funds" shall mean, as of any applicable
date of determination, the Harvest Funds and their Permitted Transferees
who become Permitted Transferees pursuant to Section 2.2(a)(iii) or (iv),
in each case who hold as of such date of determination Equity Securities of
the Company.
"Holders' Counsel" shall have the meaning set forth in the definition
of "Registration Expenses."
"Holdings" shall have the meaning set forth in the recitals to this
Agreement.
"Holdings Plan" shall have the meaning set forth in the recitals of
this Agreement.
"Holdings Stockholders Agreement" shall have the meaning set forth in
the recitals of this Agreement.
"Incentive Securities" shall mean and include, at any time, (a) all
Stock Options and (b) all shares of Capital Stock issued upon the exercise
of Stock Options.
"Incidental Registration" shall have the meaning set forth in Section
3.2(a) of this Agreement.
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"Indentures" shall mean the Senior Discount Indenture and the Senior
Subordinated Indenture.
"Independent Firm" shall have the meaning set forth in Section 4.4(a)
of this Agreement.
"Initiating Investors" shall have the meaning set forth in the
definition of "Approved Recapitalization."
"Investcorp Investors" shall mean, as of any applicable date of
determination, the original Preferred Holders and their Permitted
Transferees who become Permitted Transferees pursuant to Section
2.2(a)(iii) or (iv), in each case who hold as of such date of determination
Equity Securities of the Company. [If Investcorp Coinvestment Partners I,
L.P. and/or Northwestern Mutual Life Insurance Company do not purchase
shares directly at closing pursuant to Section 9.14 of the Stock Purchase
Agreement, and therefore either such entity is not an "original Preferred
Holder" on the date of this Agreement, the parties will agree to add
language to the executed version of this Agreement to provide that the
entity that subsequently purchases shares from an Investcorp Investor
thereof shall be a Permitted Transferee of the Investcorp Investors under
Section 2.2, and as such it shall be deemed an Investcorp Investor;
provided, that such transfer occurs within six months after closing]
"Investcorp IPO Consent Right" shall have the meaning set forth in
Section 3.1(f)(i) of this Agreement.
"Investcorp Priority" shall have the meaning set forth in Section
3.1(f)(i) of this Agreement.
"Investcorp Recap Event" shall have the meaning set forth in Section
4.7(b)(ii) of this Agreement.
"Management Stockholder" shall mean each of the Executives and each of
the members of management of the Company or its Subsidiaries that, from
time to time, become party to this Agreement pursuant to Section 6.5(b)
hereto as updated by Section 2.2(c), in each case who hold as of such date
of determination Equity Securities of the Company.
"Mezzanine Notes" shall mean $75,000,000 original principal amount of
13.625% Senior Notes Due 2014 of the Company outstanding pursuant to an
indenture dated as of the date hereof (the "Mezzanine Notes Indenture").
"Mezzanine Notes Indenture" shall have the meaning set forth in the
definition of "Mezzanine Notes."
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
"New Bank Facility" shall mean the amended and restated credit
agreement, among the Company, Holdings, Associated, Gentek Building
Products Limited and UBS
8
AG, Stamford Branch and Canadian Imperial Bank of Commerce, as
administrative agents, dated as of the date hereof.
"New Securities" shall mean any Capital Stock of the Company, whether
authorized now or in the future, and any rights, options or warrants to
purchase any Capital Stock ("Options"), provided that "New Securities"
shall not include (a) Capital Stock sold in a Public Offering or in a
transaction pursuant to Rule 144A of the Securities Act, (b) Capital Stock
issued as consideration in any merger or Recapitalization of the Company or
issued as consideration for the acquisition of another Person or assets of
another Person, (c) any issuance of Capital Stock approved by a Special
Board Approval to any Person which is determined by the Board to be
strategically beneficial to the operations of the Company (other than
solely as a source of capital), (d) Options issued to a commercial bank,
commercial leasing company or other Person whose principal business is the
extension of financing to third parties as part of any financing
transaction, so long as such Options are not the only security component of
such financing transaction or (e) Incentive Securities; provided that in
the event any of the Harvest Funds, the Investcorp Investors or any of
their respective Affiliates are to participate in any issuance contemplated
by any of clauses (a) through (e), such issuance shall be subject to
approval by the Requisite Disinterested Holders and, if, the Harvest Funds
are to participate, the Investcorp Investors, and, if, the Investcorp
Investors are to participate, the Harvest Funds.
"New Securities Price" shall have the meaning set forth in Section
2.5(a) of this Agreement.
"Non-Qualified Person" shall mean any Person who is (a) directly or
indirectly engaged in any business which the Board determines to be
competing with the businesses of the Company or any of its Subsidiaries,
(b) any material customer or supplier of the Company or any of its
Subsidiaries, (c) an adverse party in any legal or arbitration proceeding
with the Company or any of its Subsidiaries, (d) designated by the Board
from time to time as a Person whose equity ownership in the Company would,
in the reasonable determination of the Board, be adverse to the Company or
its businesses and (e) an Affiliate of any Person described in clauses (a)
or (d), unless otherwise determined by the Board.
"Notifying Stockholder" shall have the meaning set forth in Section
4.6 of this Agreement.
"Options" shall have the meaning set forth in the definition of "New
Securities."
"Other Drag Stockholders" shall have the meaning set forth in Section
2.4(b) of this Agreement.
"Other Tag Stockholders" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"Outstanding Equity Securities" shall mean, as of any applicable date
of determination, all shares of Capital Stock (including, for such purposes
but without
9
duplication, shares of Preferred Stock on an as-converted basis)
outstanding as of such date of determination plus without duplication all
shares of Common Stock issuable upon the exercise of Designated Options
then outstanding.
"Participant" shall have the meaning set forth in Section 2.3(b) of
this Agreement.
"Permissible Change Period" shall mean the period during the relevant
calendar year from and including March 1 through and including April 30;
provided, however, that during the year, if any, in which the Equity Value
of the Company is determined for purposes of Section 4.4(a) of this
Agreement, the Permissible Change Period shall commence on March 1 of such
calendar year and shall last until the later of (i) 30 days after the date
the Equity Value of the Company is finally determined pursuant to Section
4.4(a) and (ii) April 30 of such calendar year.
"Permitted Acquisitions" shall mean the acquisition of assets or
businesses (by merger, stock purchase, asset purchase or otherwise) from
Persons that are not Affiliates of the Company or any of the Stockholders;
provided that the value of the consideration paid for such assets or
business acquired shall not exceed $25 million.
"Permitted Transfer" shall have the meaning set forth in Section
2.2(a) of this Agreement.
"Permitted Transferee" shall have the meaning set forth in Section
2.2(a) of this Agreement.
"Per Share Price" shall mean an amount equal to the quotient of the
Equity Value of the Company at such time divided by the total number of
Equity Securities of the Company at such time (giving pro forma effect to
the conversion of any outstanding Preferred Stock and the exercise of any
outstanding Stock Options or Options to the extent convertible or
exchangeable for Common Stock at such time at an exercise price less than
the fair market value of the Common Stock at such time).
"Person" shall mean and include natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"Preemptive Exercise Notice" shall have the meaning set forth in
Section 2.5(a) of this Agreement.
"Preemptive Notice" shall have the meaning set forth in Section 2.5(a)
of this Agreement.
"Preemptive Purchase" shall have the meaning set forth in Section
4.4(b) of this Agreement.
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"Preferred Holder" and "Preferred Holders" shall have the meaning set
forth in the preamble to this Agreement.
"Preferred Stock" shall mean the Series I Preferred Stock and the
Series II Preferred Stock.
"Pro Rata Amount" shall mean, at any time, with respect to any
Stockholder and any transaction, the quotient (expressed as a percentage)
obtained by dividing (a) the number of Equity Securities held by such
Stockholder at such time (calculated by assuming conversion of the
Preferred Stock into Common Stock) by (b) the aggregate number of Equity
Securities outstanding at such time.
"Projected Adjusted Cash Flow" shall mean, for the period from January
1, 2005 through December 31, 2008, $646,500,000 (the "Base Amount"),
provided that the Base Amount shall be (i) adjusted dollar for dollar for
any increase or decrease in EBITDA resulting from acquisitions or
dispositions outside the ordinary course of business that have been made by
the Company or any of its Subsidiaries during such period, and (ii)
decreased dollar-for-dollar by the aggregate amount of capital expenditures
made during such four-year period (determined in accordance with GAAP) in
excess of $86,000,000, to the extent approved by a Special Board Approval
pursuant to Section 4.3(j). All adjustments to the Base Amount shall be
made in good faith by a financial or accounting officer of the Company and
approved in good faith by a Special Board Approval.
"Public Offering" shall mean a sale of Common Stock through an
underwritten public offering pursuant to an effective registration
statement filed with the SEC.
"Put Offer" shall have the meaning set forth in the Certificate of
Designations.
"Recap Event" shall have the meaning set forth in Section 4.7(b) of
this Agreement.
"Recap Event Amount" shall have the meaning set forth in Section
4.7(c) of this Agreement.
"Recapitalization" shall mean a transaction or series of related
transactions that result in a distribution by repurchase to holders of
Equity Securities (including any debt or equity financing related to such
distribution by repurchase).
"Receiving Stockholders" shall have the meaning set forth in Section
4.6(a) of this Agreement.
"Registration" shall mean each Required Registration and each
Incidental Registration.
"Registration Expenses" shall mean, with respect to the Company, all
expenses incident to the Company's performance of or compliance with
Article III including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in
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connection with blue sky qualifications of the Registrable Securities),
expenses of printing certificates for the Registrable Securities in a form
eligible for deposit with the Depository Trust Company, messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), and fees and disbursements of counsel for the Company
and its independent certified public accountants (including the expenses of
any management review, cold comfort letters or any special audits required
by or incident to such performance and compliance), securities acts
liability insurance (if the Company elects to obtain such insurance), the
reasonable fees and expenses of any special experts retained by the Company
in connection with such registration, fees and expenses of other Persons
retained by the Company, the fees and expenses of one (1) counsel and
applicable local counsel (the "Holders' Counsel") which represents all
holders of Registrable Securities to be included in the relevant
Registration, selected by the holders of a majority of the Registrable
Securities to be included in such Registration subject to the approval of
the Board; but not including any underwriting fees, discounts or
commissions attributable to the sale of securities or fees and expenses of
counsel representing the holders of Registrable Securities included in such
Registration (other than the Holders' Counsel and applicable local counsel)
incurred in connection with the sale of Registrable Securities.
"Registrable Securities" shall mean, at any time:
(a) any shares of Common Stock; and
(b) any securities issued or issuable in respect of shares of
Common Stock (including, without limitation, by way of stock dividend,
stock split, distribution, exchange, combination, merger,
recapitalization, reorganization or otherwise).
As to any particular Registrable Securities once issued,
such Registrable Securities shall cease to be Registrable Securities:
(a) when a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with
such registration statement;
(b) when such securities shall be eligible to be distributed by
the holder thereof to the public pursuant to Rule 144(k) under the
Securities Act (or any successor provision) without any time or volume
limitations; or
(c) when such securities shall have ceased to be outstanding.
"Regulated Stockholder" shall mean any Stockholder that directly or
indirectly, due to its ownership by an entity subject to Regulation Y of
the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 225
(or any successor to such regulation) ("Regulation Y"), is subject to the
provisions of Regulation Y and holds shares of Equity Securities.
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"Regulation Y" shall have the meaning set forth in the definition of
"Regulated Stockholder."
"Regulatory Problem" shall mean, with respect to any Regulated
Stockholder, any set of facts, events or circumstances the existence of
which would cause such Regulated Stockholder to be in violation of any law,
regulation, rule or other requirement of any Governmental Authority
(including, without limitation, Regulation Y).
"Replacement CEO" shall have the meaning set forth in 4.4(a) of this
Agreement.
"Required Registration" shall have the meaning set forth in Section
3.1(a) of this Agreement.
"Requisite Disinterested Holders" shall mean, at any time, the holders
of at least fifty percent (50%) of the Equity Securities held by Financial
Investors at such time.
"Requisite Holders" shall mean, at any time, and with respect to any
Registration and related Public Offering, the holders of at least fifty
percent (50%) of the Registrable Securities proposed to be included in such
Public Offering before giving effect to any cut-back provisions contained
herein.
"Response Deadline" shall have the meaning set forth in Section 2.3(b)
of this Agreement.
"Restructuring" shall have the meaning set forth in the recitals to
this Agreement.
"Retained Liquidation Preference" shall mean, as of any applicable
date of determination, the Aggregate Liquidation Preference Amount divided
by the total number of shares of Preferred Stock then outstanding.
"SEC" shall mean, at any time, the Securities and Exchange Commission
or any other federal agency at such time administering the Securities Act.
"Second Valuation" shall have the meaning set forth in Section 4.5(a)
of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Senior Discount Indenture" shall mean the Indenture dated as of March
4, 2004, between Holdings and the Wilmington Trust Company, a Delaware
corporation, as trustee (the "Trustee"), and the other parties signatory
thereto.
"Senior Discount Notes" shall mean the promissory notes issued under
the terms of the Senior Discount Indenture.
"Senior Subordinated Indenture" shall mean the Indenture dated as of
April 23, 2002, among Associated, the Trustee and the other parties
signatory thereto, as amend by
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the Supplemental Indenture dated as of May 10, 2002, among Associated, the
Trustee, and Alside, Inc. a Delaware corporation.
"Senior Subordinated Notes" shall mean promissory notes issued under
the terms of the Senior Subordinated Indenture.
"Series I Preferred Stock" shall mean the Class A Series I (Voting)
Convertible Preferred Stock of the Company, par value $0.01 per share.
"Series II Preferred Stock" shall mean the Class A Series II
(Non-Voting) Convertible Preferred Stock of the Company, par value $0.01
per share.
"Special Board Approval" shall mean the prior approval of a majority
of the Board, which majority shall include at least one (1) Director
designated by the Investcorp Investors pursuant to Section 4.1(a)(iii) and
at least one (1) Director designated by the Harvest Funds pursuant to
Section 4.1(a)(i).
"Stock Options" shall mean all options to purchase Equity Securities
granted to members of management and key employees of the Company pursuant
to a stock option or similar equity plan approved by the Board. For
purposes of this Agreement, "Stock Options" shall be deemed to include the
Designated Options.
"Stock Option Plan" shall mean the AMH Holdings II, Inc. 2004 Stock
Option Plan of the Company, as in effect on the date hereof, authorizing
the issuance of up to 469,782 shares of the Class A Series II Common Stock.
"Stock Purchase Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Stockholder" shall mean, as of any applicable date of determination,
each Harvest Fund, each Financial Investor, each Investcorp Investor, each
Management Stockholder, each Executive and each other Person who becomes a
Stockholder pursuant to Section 6.5(b), and their respective Permitted
Transferees who hold Equity Securities of the Company as of such date of
determination.
"Subsidiary" shall mean, with respect to any Person at any time, any
corporation, partnership, business trust, joint stock company, association,
limited liability company or other business entity of which (a) if a
corporation, a majority of the total voting power of stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors or trustees thereof is at such time owned or
controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (b) if a
partnership, limited liability company, business trust, joint stock
company, association or other business entity other than a corporation, a
majority of the partnership, membership or other similar ownership
interests thereof is at such time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a partnership,
limited liability company, business trust, joint stock company, association
or other business
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entity other than a corporation if such Person or Persons shall be
allocated a majority of the partnership, association or other business
entity gains or losses or shall be or control the managing director,
manager, a general partner or the trustee of such partnership, limited
liability company, business trust, joint stock company, association or
other business entity.
"Tag-Eligible Securities" shall mean Equity Securities and shares of
Common Stock issuable upon the exercise of Stock Options that are vested as
of any applicable date of determination.
"Tag Sellers" shall have the meaning set forth in Section 2.3(a) of
this Agreement.
"Target Amount" shall mean an amount equal to $150 million.
"TGF" shall have the meaning set forth in Section 2.3(b) of this
Agreement.
"Third Valuation" shall have the meaning set forth in Section 4.5(a)
of this Agreement.
"Threshold Amount" shall mean as of any applicable date of
determination, $225,000,000 multiplied by a fraction, (i) the numerator of
which is the Aggregate Liquidation Preference Amount and (ii) the
denominator of which is the Target Amount.
"Transfer" shall have the meaning set forth in Section 2.1(a) of this
Agreement.
"Transfer Notice" shall have the meaning set forth in Section 2.3(a)
of this Agreement.
"Trustee" shall have the meaning set forth in the definition of
"Senior Discount Indenture."
"Voting Stock" shall mean the Class A Series I Common Stock, the Class
B Series I Common Stock, the Series I Preferred Stock and any other Capital
Stock of the Company entitled to vote in the election of directors of the
Company.
"Weston Presidio" shall mean Weston Presidio Service Company, LLC.
ARTICLE II
TRANSFER OF EQUITY SECURITIES
SECTION 2.1 Restrictions.
(a) No Stockholder shall, directly or indirectly, (i) sell, assign, or
in any other manner transfer any Equity Securities to any Person (each such
action, a "Transfer"), except pursuant to a Permitted Transfer or pursuant to
Sections 4.4(b), 4.4(c), 4.5, 4.6 or 4.7 or (ii) pledge or grant a security
interest in any Equity Security to any Person.
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(b) From and after the date hereof until this Agreement is terminated,
all certificates or other instruments representing Equity Securities held by any
of the Stockholders shall bear a legend which shall substantially state as
follows:
"The securities represented by this certificate are subject to and
have the benefit of a Stockholders Agreement dated as of December __,
2004, as the same may be amended from time to time. A copy of such
Stockholders Agreement has been filed in the chief executive office of
the Company where the same may be inspected daily during business
hours.
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state or other
jurisdiction and such securities may not be offered, sold, pledged or
otherwise transferred except (i) pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act and (ii) in
accordance with any applicable securities laws of any State of the
United States."
Notwithstanding the foregoing provisions of this Section 2.1(b), the legend
required by the paragraph immediately above shall be removed from any such
certificates representing Equity Securities (i) when and so long as such Equity
Securities shall have been effectively registered under the Securities Act and
disposed of pursuant thereto or (ii) when the Company shall have received an
opinion of counsel reasonably satisfactory to it that such Equity Securities may
be freely transferred at any time without registration thereof under the
Securities Act and that such legend may be removed.
(c) Each Stockholder agrees that it will not effect any Transfer of
Equity Securities unless such Transfer is made (i) pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act, (ii) in accordance with any
applicable securities laws of any State of the United States and (iii) in
accordance with any other Applicable Laws.
(d) The Company agrees that it will not cause or permit any Transfer
of any Equity Securities to be made on its books unless such Transfer is a
Permitted Transfer and has been made in accordance with the terms hereof.
(e) Notwithstanding the foregoing, prior to the consummation of a
Public Offering, the Company may refuse to Transfer any Equity Securities if
making such Transfer would cause the number of recordholders of such Equity
Securities to exceed 475.
(f) Notwithstanding anything herein to the contrary, each Stockholder
hereby agrees that it will not, and it will cause each of its Affiliates not to,
engage in any transaction that would constitute or result in a "Change of
Control" under the Senior Discount Indenture, the Senior Subordinated Indenture
or the Mezzanine Notes Indenture, except with the prior written consent of the
Harvest Funds and the Investcorp Investors.
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SECTION 2.2 Permitted Transfers.
(a) Notwithstanding anything to the contrary contained herein (but
only to the extent such Transfer is in compliance with Sections 2.1(c), 2.1(e)
and 2.1(f)), a Stockholder may at any time effect any of the following Transfers
(each a "Permitted Transfer," and each transferee of such Stockholder in respect
of such Transfer, a "Permitted Transferee"):
(i) any Transfer of any or all Equity Securities held by a Stockholder
following such Stockholder's death by will or intestacy to such
Stockholder's legal representative, heir or legatee;
(ii) any Transfer of any or all Equity Securities held by a
Stockholder as a gift or gifts during such Stockholder's lifetime to such
Stockholder's spouse, children, grandchildren or a trust for the benefit of
such Stockholder or any of the foregoing;
(iii) any Transfer of any or all Equity Securities held by a Harvest
Fund, an Investcorp Investor or a Financial Investor to any Affiliate of
such Person (other than a Non-Qualified Person) [placeholder for Investcorp
Coinvestment Partners I, L.P. and/or Northwestern Mutual Life Insurance
Company]; provided that any such Affiliate shall Transfer such Equity
Securities to the Stockholder from whom such Equity Securities were
originally received or acquired within five (5) days after ceasing to be an
Affiliate of such Stockholder; and provided, further, that notwithstanding
anything in this Agreement to the contrary, shares of Preferred Stock (as
such) may only be Transferred by the Investcorp Investors pursuant to this
Section 2.2(a)(iii), Section 2.2(a)(vii) or Section 2.2(a)(viii);
(iv) any Transfer by a Harvest Fund, an Investcorp Investor or any
Financial Investor to the partners, members or beneficiaries of such
Harvest Fund, Investcorp Investor or Financial Investor upon the
liquidation or dissolution of such Harvest Fund, such Investcorp Investor
or such Financial Investor, as the case may be, in accordance with its
controlling fund or other controlling documents, as applicable;
(v) any Transfer of any or all Equity Securities held by a Stockholder
which is made (A) pursuant to Section 2.4 or (B) as an Other Tag
Stockholder pursuant to Section 2.3;
(vi) any Transfer of any or all Equity Securities held by a
Stockholder which is made pursuant to Article III;
(vii) any Transfer by a Stockholder to the Company (A) upon Special
Board Approval or (B) as expressly permitted by this Agreement or the
Certificate of Designations; or
(viii) any Transfer not described in any of clauses (i) through (vii)
above upon Special Board Approval; provided, however, that if Special Board
Approval is granted for the sale of shares of Common Stock by an Investcorp
Investor or a Harvest Fund, notwithstanding anything contained in Section
2.3, such sale shall be subject to Section 2.3, whether or not it
constitutes a Designated Sale Event; provided, further,
17
that if any Investcorp Investor proposes to sell Preferred Stock to
any Harvest Fund under this clause (viii), then in addition to obtaining
Special Board Approval for such sale, such Investcorp Investor shall be
required to obtain the prior written approval of the Requisite
Disinterested Holders prior to consummating such sale.
(b) In any Transfer referred to in Section 2.2(a) (other than clauses
(v) and (vi) and, to the extent such Transfer constitutes a Change of Control
Transaction, clause (viii) thereof), the Permitted Transferee shall agree in
writing to be bound by all the provisions of this Agreement and shall execute
and deliver to the Company a counterpart to this Agreement. Each Permitted
Transferee (other than a Permitted Transferee who received the relevant Equity
Securities in a Transfer pursuant to Section 2.2(a)(v) or Section 2.2(a)(vi) or
to the extent such Transfer constitutes a Change of Control Transaction, Section
2.2(a)(viii)) shall hold such shares of Equity Securities subject to the
provisions of this Agreement as a "Stockholder" hereunder as if such Permitted
Transferee were an original signatory hereto and shall be deemed to be a party
to this Agreement.
(c) In any Transfer by a Harvest Fund to a Permitted Transferee which
is made pursuant to Section 2.2(a)(iii) or Section 2.2(a)(iv), such Permitted
Transferee shall thereafter be a "Harvest Fund." In any Transfer by a Financial
Investor to a Permitted Transferee pursuant to Section 2.2(a)(iii) or Section
2.2(a)(iv), such Permitted Transferee shall thereafter be a "Financial
Investor." In any Transfer by a Management Stockholder to a Permitted Transferee
pursuant to Section 2.2(a)(i) or Section 2.2(a)(ii), such Permitted Transferee
shall thereafter be a "Management Stockholder." In any Transfer by an Investcorp
Investor to a Permitted Transferee pursuant to Section 2.2(a)(iii) or Section
2.2(a)(iv), such Permitted Transferee shall thereafter be an "Investcorp
Investor."
SECTION 2.3 Tag-Along Rights.
(a) Except in the case of a Transfer of Preferred Stock, in the event
that any Stockholder or group of Stockholders ("Tag Sellers") propose to effect
a Transfer of Equity Securities (other than a Permitted Transfer described in
Section 2.2(a)(i), (ii), (iii), (iv), (v)(A), (vi) or (vii)) that will result in
a Designated Sale Event, such Tag Sellers shall promptly give written notice
(the "Transfer Notice") to the Company and each of the other Stockholders and
holders of vested Stock Options that are not Tag Sellers (the "Other Tag
Stockholders") at least twenty (20) days prior to the scheduled consummation of
such Transfer. The Transfer Notice shall describe in reasonable detail the
proposed Transfer including, without limitation, the identity of the proposed
purchaser, the type and number of shares of Equity Securities to be sold, the
purchase price of each such share of Equity Securities to be sold, the form of
consideration, the amount of any escrow, the nature of any significant other
arrangements (representations and warranties, indemnifications, etc.) and the
date such proposed sale is expected to be consummated.
(b) Each of the Other Tag Stockholders shall have the right,
exercisable upon delivery of an irrevocable written notice to the Tag Seller
within ten (10) Business Days after receipt of the Transfer Notice (the
"Response Deadline"), to participate in such proposed Transfer on the same terms
and conditions as set forth in the Transfer Notice including, without
limitation, the making of representations and warranties as to due
incorporation, existence and
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good standing, power and authority of such Other Tag Stockholder, and ownership
of the Equity Securities, the granting of all indemnifications (other than The
Texas Growth Fund II - 1998 Trust ("TGF") which shall provide insurance in form
and substance satisfactory to the Harvest Funds with respect to all such
indemnifications) and participating in any escrow arrangements to the extent of
their respective pro rata portion and similar agreements agreed to by the Tag
Seller, provided that the indemnification obligation of any Other Tag
Stockholder to a proposed transferee with respect to the breach of any
representation or warranty concerning the Company shall be limited to the lesser
of its respective pro rata portion of the obligation and the net proceeds to be
received by such Other Tag Stockholder in connection with such Transfer, and
provided further that the Investcorp Investors agree that to participate in such
Transfer they will convert shares of Preferred Stock into shares of Common Stock
to the extent of the ultimate participation by the Investcorp Investors as a Tag
Seller or as Other Tag Stockholders therein. For an Other Tag Stockholder to
participate in such Transfer with respect to its vested Stock Options (a "Tag
Option Holder"), such Tag Option Holder, by the Response Deadline, must deliver
to the Company (1) its notice of election to exercise a number of Stock Options
up to its pro rata portion (as described below), (2) payment for the aggregate
exercise price for such exercise and (3) if not already a party to this
Agreement, an executed signature page to this Agreement. Each Other Tag
Stockholder electing to participate in the Transfer described in the Transfer
Notice (each, a "Participant") shall indicate in its notice of election to the
Tag Seller the maximum number of Tag-Eligible Securities it desires to Transfer.
Each such Participant shall be entitled to Transfer a number of Tag-Eligible
Securities equal to such holder's pro rata portion of the total number of
Tag-Eligible Securities to be Transferred, as set forth in the Transfer Notice,
up to such maximum number, provided that the Investcorp Investors may, at their
option, indicate the number of Tag-Eligible Securities that they desire to
Transfer in the aggregate instead of per Participant. For purposes of this
Section 2.3(b) and Section 2.3(c), "pro rata portion" shall mean for each
Participant, with the Investcorp Investors being treated as one Participant if
so requested, a fraction, the numerator of which is the number of Tag-Eligible
Securities held by such Participant (calculated assuming conversion of the
Preferred Stock into Common Stock) immediately prior to the Transfer proposed in
the Transfer Notice and the denominator of which is the total number of
Tag-Eligible Securities (calculated assuming conversion of the Preferred Stock
into Common Stock) included in such Transfer outstanding immediately prior to
the Transfer proposed in the Transfer Notice held by the Tag Seller and the
Other Tag Stockholders collectively. In the event that any Stockholder does not
elect to sell all of its respective pro rata portion, the Tag-Eligible
Securities that were available for sale by such non-electing Other Tag
Stockholders but are not being so sold (the "Excess Tag Securities") shall
automatically be deemed to be accepted for sale by (i) each Other Tag
Stockholder who indicated in their written response to the Transfer Notice a
desire to participate in the sale of Tag-Eligible Securities in excess of its
pro rata portion and (ii) the Tag Seller (collectively, the "Excess
Participants"). Unless otherwise agreed by all of the Excess Participants, each
Excess Participant shall sell a number of Excess Tag Securities equal to the
lesser of (x) the number of Excess Tag Securities indicated in the written
response to the Transfer Notice or, in the case of the Tag Seller, the Transfer
Notice, if any, and (y) an amount equal to the product of (A) the aggregate
number of Excess Tag Securities and (B) a fraction, the numerator of which is
the number of Tag-Eligible Securities held at such time by such Excess
Participant (calculated assuming conversion of the Preferred Stock into Common
Stock) and the denominator of which
19
is the aggregate number of Tag-Eligible Securities held at such time by all
Excess Participants (calculated assuming conversion of the Preferred Stock into
Common Stock).
(c) Each Participant shall effect its participation in the Transfer by
delivering to the Tag Seller (to hold in trust as agent for such Participant),
at least three (3) Business Days prior to the date scheduled for such Transfer
as set forth in the Transfer Notice, one or more certificates or other
instruments, as applicable, in proper form for transfer, which represent the
number of Tag-Eligible Securities that such Participant desires to Transfer in
accordance with Section 2.3(b). Such certificate or certificates or other
instruments, as applicable, shall be delivered by the Tag Seller to such
Permitted Transferee on the date scheduled for such Transfer in consummation of
the Transfer pursuant to the terms and conditions specified in the Transfer
Notice and such Permitted Transferee shall remit to each such Participant its
pro rata portion of the net sale proceeds (taking into account transaction costs
and expenses incurred by the Tag Seller in connection with such Transfer and
transaction costs and expenses incurred by each Participant in connection with
such Transfer) to which such Participant is entitled by reason of its
participation in such sale. The Tag Seller's sale of Equity Securities in any
sale proposed in a Transfer Notice shall be effected on terms and conditions not
more favorable than those set forth in such Transfer Notice and applicable to
the other Participants. In the event the proposed Transfer is not consummated
within twenty (20) Business Days of the date scheduled for such Transfer, the
Tag Seller shall promptly return all certificates and/or instruments received
from Participants.
(d) The exercise or non-exercise of the rights of any of the Other Tag
Stockholders hereunder to participate in one or more Transfers of Equity
Securities made by the Tag Seller shall not adversely affect their rights to
participate in subsequent Transfers of Equity Securities subject to this Section
2.3. Nothing in this Section 2.3 shall change the limitations and obligations
set forth in Section 2.1 and 2.2.
SECTION 2.4 Drag-Along Rights.
(a) Each Stockholder agrees that a Drag Along Event may be initiated
by (i) a mutual written consent to do so executed by the Harvest Funds and the
Investcorp Investors, (ii) pursuant to Section 4.4(b) or 4.6 by the Investcorp
Investors by written notice to the Harvest Funds or (iii) pursuant to Section
4.6 by the Harvest Funds by written notice to the Investcorp Investors. Each
party initiating the Drag Along Event pursuant to the immediately preceding
sentence is referred to herein as a "Drag Seller" and all such initiating
parties as "Drag Sellers."
(b) Subject to Section 2.4(e), at the written request of the Drag
Seller or Drag Sellers, each of the other Stockholders (the "Other Drag
Stockholders") agrees to vote all of its shares of Equity Securities, at a
special or annual meeting of Stockholders or by written consent in lieu of a
meeting, in favor of and, if applicable, shall sell its pro rata portion of the
amount of Equity Securities and Stock Options to be Transferred in connection
with, the Drag Along Event. In order to effect the foregoing covenant, each
Existing Investor that is an Other Drag Stockholder under this Section 2.4
hereby grants to the Harvest Funds, to the extent the Harvest Funds are a Drag
Seller pursuant to this Section 2.4, with respect to all of such Stockholder's
shares of Capital Stock an irrevocable proxy (which is deemed to be coupled with
an interest) for
20
the term of this Agreement with respect to any stockholder vote or action by
written consent solely to effect such Drag Along Event in compliance with this
Section 2.4.
(c) The Company and the Other Drag Stockholders each hereby agree to
cooperate fully (including by waiving any other appraisal rights to which such
Other Drag Stockholder may be entitled under Applicable Law and each such
Stockholder does hereby waive all such appraisal rights) with the Drag Sellers
and the purchaser in any such Drag Along Event and, to execute and deliver all
documents (including purchase agreements) and instruments as the Drag Sellers
and such purchaser request to effect such Drag Along Event including, without
limitation, the making of representations and warranties as to due
incorporation, existence and good standing, power and authority of such Other
Drag Stockholder, and ownership of Equity Securities or Stock Options and the
granting of all indemnifications (other than TGF which shall provide insurance
in form and substance satisfactory to the Drag Sellers with respect to all such
indemnifications) and the execution of all agreements (including, without
limitation, participating in any escrow arrangements to the extent of their
respective pro rata portion) and similar arrangements which the Drag Sellers is
making or executing, provided that the indemnification obligation of any Other
Drag Stockholder to proposed purchaser with respect to the breach of any
representation or warranty concerning the Company shall be limited to the lesser
of the pro rata portion of the obligation and the net proceeds to be received by
such Other Drag Stockholder in connection with such Drag Along Event. Upon the
closing of such Drag Along Event, each Stockholder shall receive its pro rata
portion of the net proceeds (taking into account transaction costs and expenses
incurred by the Harvest Funds or the Investcorp Investors, as applicable, in
connection with such Drag Along Event, reasonable transaction costs and expenses
incurred by each other Stockholder in connection with such Drag Along Event and
the costs and expenses described in Section 2.4(d) (but only to the extent not
paid or payable by the Company under this Agreement)) and such sale shall be on
the same terms and conditions as afforded to the Drag Seller(s). Subject to the
transaction costs and expenses discussed in the immediately preceding sentence,
for purposes of Section 2.4(b) and 2.4(c), "pro rata portion" shall mean with
respect to each Stockholder a fraction, the numerator of which is the number of
Equity Securities (including, for such purposes, the number Stock Options to be
exercised prior to such Transfer or to be cashed-out in such Transfer) held by
such Stockholder immediately prior to such Drag Along Event and the denominator
of which is the total number of such Equity Securities (including, for such
purposes, the aggregate number Stock Options to be exercised prior to such
Transfer or to be cashed-out in such Transfer) outstanding immediately prior to
such Drag Along Event, in each case calculated on an as-converted basis and
taking into account for each holder of Stock Options that are cashed-out in the
Transfer, rather than exercised prior to the Transfer for shares of Common
Stock, the aggregate exercise price of any such Stock Options cashed-out in the
Transfer.
(d) It is understood and agreed that in consideration of investment
banking services provided by any Person (including the Harvest Funds or the
Investcorp Investors or any of their respective Affiliates) a reasonable fee may
be paid in an amount that is customary and equivalent to a fee arrangement
negotiated on an "arms-length" basis; provided that if any such fee is payable
to any Harvest Fund or any of its Affiliates or the Investcorp Investors or
their Affiliates, such fee shall be deemed reasonable if it is consistent with
the terms of the amended and restated management agreement entered into by and
between Harvest Partners, Inc. and
21
Associated as of the date hereof or the management agreement entered into by and
between Investcorp International Inc. and Associated as of the date hereof, as
applicable.
(e) Unless a holder of Preferred Stock elects to convert its shares of
Preferred Stock into Common Stock in order to participate in a Transfer pursuant
to this Section 2.4, such holder shall accept the Put Offer in accordance with
the terms of Article 7 of the Certificate of Designations.
SECTION 2.5 Grant of Preemptive Rights to Stockholders.
(a) In the event that, at any time, the Company shall decide to
undertake an issuance of New Securities that is permitted by this Agreement, the
Company shall at such time deliver to each Stockholder written notice of the
Company's decision, describing the amount, type and terms (including the
exercise price and expiration date thereof in the case of any Options) of such
New Securities, the purchase price per New Security (the "New Securities Price")
to be paid by the purchasers of such New Securities and the other terms upon
which the Company has decided to issue such New Securities, including, without
limitation, the expected timing of such issuance, which shall not be less than
twenty (20) Business Days after the date upon which such notice is given (the
"Preemptive Notice"). Each Stockholder shall have ten (10) Business Days from
the date on which they receive the Preemptive Notice to agree by written notice
to the Company (a "Preemptive Exercise Notice") to purchase up to their Pro Rata
Amount of such New Securities (and any Excess New Securities) for the New
Securities Price and upon the general terms specified in the Preemptive Notice
by giving written notice to the Company and stating therein the quantity of New
Securities to be purchased by any such Stockholder. In the event that in
connection with such a proposed issuance of New Securities, such Stockholder
shall for any reason fail or refuse to give such written notice to the Company
within such ten (10) Business Days period, such Stockholder shall, for all
purposes of this Section 2.5, be deemed to have refused (in that particular
instance only) to purchase any of such New Securities and to have waived (in
that particular instance only) all of its rights under this Section 2.5 to
purchase any of such New Securities. In the event that any Stockholder does not
elect to purchase all of its respective Pro Rata Amount of such New Securities,
the New Securities that were available for purchase by such non-electing
Stockholders (the "Excess New Securities") shall automatically be deemed to be
accepted for purchase by the Stockholders who indicated in their Preemptive
Exercise Notice a desire to participate in the purchase of New Securities in
excess of their Pro Rata Amount. Unless otherwise agreed by all of the
Stockholders participating in the purchase of such New Securities, each
Stockholder who indicated to purchase more than its Pro Rata Amount shall
purchase a number of Excess New Securities equal to the lesser of (i) the number
of Excess New Securities indicated in the Preemptive Exercise Notice, if any,
and (ii) an amount equal to the product of (A) the aggregate number of Excess
New Securities and (B) a fraction, the numerator of which is the number of
Equity Securities held at such time by such Stockholder and the denominator of
which is the aggregate number of Equity Securities held at such time by all
Stockholders who participate in the purchase of Excess New Securities.
(b) In the event any New Securities to be issued by the Company are
not subject to a Preemptive Exercise Notice, the Company shall be free to issue
such New Securities to any Person, provided that (i) the price per New Security
at which such New Securities are
22
being issued to and purchased by such Person is not less than the New Securities
Price, (ii) the other terms and conditions pursuant to which such Person
purchases such New Securities are substantially equivalent to the terms set
forth in the Preemptive Notice and (iii) such issuance of New Securities takes
place within ninety (90) days of the Preemptive Notice. After expiration of the
90-day period, any New Securities to be issued by the Company shall be subject
to this Section 2.5.
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1 Required Registration.
(a) Required Registration. Commencing six (6) months after the
occurrence of the initial Public Offering of the Company (subject to any lock-up
agreement under Section 3.8 that may be in effect), the Harvest Funds and the
Investcorp Investors shall have the right to require (a "Demand Request") the
Company to register under the Securities Act all or a portion of such number of
Registrable Securities as such Stockholders shall designate for sale in a
written request to the Company (each, a "Required Registration").
(b) Piggyback Rights. Upon receipt by the Company of a Demand Request,
the Company shall deliver a written notice (a "Demand Notice") to each of the
other Stockholders stating that the Company intends to comply with a Demand
Request and informing each such Stockholder of its right to include Registrable
Securities in such Required Registration. Within ten (10) Business Days after
receipt of such Demand Notice, each such other Stockholder shall have the right
to request in writing that the Company include all or a specific portion of the
Registrable Securities held by such other Stockholder in such Required
Registration.
(c) Postponement. The Company may postpone any Required Registration
for a reasonable period of time, not to exceed one hundred eighty (180) days
once in every twelve (12) month period, if the Board determines in good faith
that such Required Registration would (i) require the disclosure of a material
transaction or other matter and such disclosure would be disadvantageous to the
Company or (ii) adversely affect a material financing, acquisition, disposition
of assets or stock, merger or other comparable transaction.
(d) Time for Filing and Effectiveness. As promptly as practicable
after a Demand Request but in no event later than the date which is sixty (60)
days after such Demand Request, the Company shall file with the SEC the Required
Registration with respect to all Registrable Securities to be so registered, and
shall use its reasonable efforts to cause such Required Registration to become
effective as promptly as practicable after the filing thereof, but in no event
later than the day which is one hundred twenty (120) days after the date of the
Demand Request. The Company will use its reasonable efforts to keep any Required
Registration filed pursuant to this Section 3.1 effective for the period
beginning on the date on which the Required Registration is declared effective
and ending on the earlier of (i) the date of full distribution of the
Registrable Securities included in such Required Registration and (ii) the date
that is one hundred eighty (180) days from the date of first effectiveness.
23
(e) Selection of Underwriters. In the event that the Registrable
Securities to be registered pursuant to a Required Registration are to be
disposed of in an underwritten Public Offering, the underwriters of such Public
Offering shall be one or more underwriting firms of nationally recognized
standing selected by the Board with a Special Board Approval.
(f) Priority on Required Registrations. In the event that, in the case
of any Required Registration, the managing underwriter for the Public Offering
contemplated by Section 3.1(e) shall advise the Company in writing (with a copy
to each holder of Registrable Securities requesting a sale) that, in such
underwriter's opinion, the amount of securities requested to be included in such
Required Registration would adversely affect the Public Offering and sale
(including pricing) of such Registrable Securities, the Registrable Securities
that shall be included in the Required Registration shall be included in the
following amounts and order of priority:
(i) first, if the Investcorp Investors did not have the right to
consent to the initial Public Offering of the Company's equity securities
pursuant to Section 4.3(m) below through a Special Board Approval (the
"Investcorp IPO Consent Right"), then the Investcorp Investors may include
in such Required Registration a number of Registrable Securities up to an
aggregate value equal to the Target Amount less, as of any applicable date
of determination, the aggregate amount of proceeds received by the
Investcorp Investors on their shares of Preferred Stock or the shares of
Common Stock issuable upon conversion of their shares of Preferred Stock,
whether through dividends, repurchases or sales to third parties
(including, without limitation, proceeds received from participation in a
prior Required Registration or a prior Incidental Registration under this
Article III) (with the number of Registrable Securities that may be
included in such Required Registration determined based upon the offering
price to the public of the securities in the Public Offering) (the
"Investcorp Priority");
(ii) second, if the Investcorp Investors have an Investcorp Priority
with respect to such Required Registration, then the Existing Investors may
include in such Required Registration an aggregate number of Registrable
Securities up to the aggregate number of Registrable Securities that may be
included under clause (i) immediately above; and
(iii) third, (A) if the Investcorp Investors did not have an
Investcorp Priority with respect to such Required Registration (and,
therefore, the Existing Investors would not have had the priority under
clause (ii) immediately above) or (B) the Investcorp Investors had an
Investcorp Priority under clause (i) and the Existing Investors had their
related priority under clause (ii), then each Stockholder (including the
Investcorp Investors and the Existing Investors) that requested to include
Registrable Securities in such Required Registration shall be entitled to
include its pro rata share of Registrable Securities, based upon the number
of Registrable Securities requested to be included by such Stockholders in
such Required Registration (and if the Investcorp Investors had an
Investcorp Priority under clause (i) and the Existing Investors had their
related priority under clause (ii), the number of Registrable Securities
that shall be taken into account for calculating their respective pro rata
shares under this clause (iii) shall be the number of Registrable
Securities requested to be included in such registration above the amounts
permitted under clauses (i) and (ii) above, as applicable); provided,
however, that if such managing underwriter shall advise the Company that,
in such underwriter's opinion, the inclusion of Registrable Securities held
by Management Stockholders would adversely affect
23
the offering and sale (including pricing) of such securities, then the
number of Registrable Securities held by such Management Stockholders to be
included in such Public Offering may be disproportionately reduced to avoid
such adverse result.
(g) The number of Demand Requests that may be made pursuant to Section
3.1 shall be up to six (6), with up to three (3) allocated to the Harvest Funds
and up to three (3) allocated to the Investcorp Investors. In the event that, in
connection with a Demand Request pursuant to Section 3.1(a), less than 50% of
the Registrable Securities proposed to be included in the Public Offering, if
any, by Stockholders are sold in such Public Offering pursuant to Section
3.1(f), such Demand Request shall be deemed not to have been a Demand Request.
SECTION 3.2 Incidental Registration.
(a) Filing of Registration Statement. If the Company at any time
proposes to register, for its own account or the account of another Person, any
of its securities (an "Incidental Registration") under the Securities Act (other
than pursuant to a registration statement on Form S 4 or Form S 8 or any
successor forms thereto and other than pursuant to Section 3.1 hereof), for sale
to the public in a Public Offering, it will at each such time give prompt
written notice to all Stockholders of its intention to do so, which notice shall
be given at least fifteen (15) Business Days prior to the date that a
registration statement relating to such registration is proposed to be filed
with the SEC. Upon the written request of any Stockholder to include Registrable
Securities held by it under such registration statement (which request shall (i)
be made within ten (10) Business Days after the receipt of any such notice, and
(ii) specify the Registrable Securities intended to be included by such holder),
the Company will use its reasonable efforts to effect the registration of all
Registrable Securities that the Company has been so requested to register by
such Stockholder; provided, however, that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason to terminate such registration
statement and not to register such securities, the Company may, at its election,
give written notice of such determination to each such holder and, thereupon,
shall be relieved of its obligation to register any Registrable Securities of
such Persons in connection with such registration.
(b) Selection of Underwriters. Notice of the Company's intention to
register such securities shall designate the proposed underwriters of such
Public Offering and shall contain the Company's agreement to use its reasonable
efforts, if requested to do so, to arrange for such underwriters to include in
such underwriting the Registrable Securities that the Company has been so
requested to sell pursuant to this Section 3.2, it being understood that the
holders of Registrable Securities shall have no right to select different
underwriters for the disposition of their Registrable Securities.
(c) Priority on Incidental Registrations. If the managing underwriter
for the Public Offering contemplated by this Section 3.2 shall advise the
Company in writing that, in such underwriter's opinion, the number of securities
requested to be included in such Incidental Registration would adversely affect
the Public Offering and sale (including pricing) of such securities the Company
shall include in such Incidental Registration the number of securities that
25
the Company is so advised should be sold in such Public Offering, in the
following amounts and order of priority:
(i) first, securities proposed to be sold by the Company for its own
account or such other Person if the registration is pursuant to a
registration rights agreement with the Company;
(ii) second, if the Investcorp Investors have an Investcorp Priority
with respect to such Incidental Registration, then the Investcorp Investors
may include in such Incidental Registration a number of Registrable
Securities up to an aggregate value equal to the Target Amount less, as of
any applicable date of determination, the aggregate amount of proceeds
received by the Investcorp Investors on their shares of Preferred Stock or
the shares of Common Stock issuable upon conversion of their shares of
Preferred Stock, whether through dividends, repurchases or sales to third
parties (including, without limitation, proceeds received from
participation in a prior Required Registration or a prior Incidental
Registration under this Article III) (with the number of Registrable
Securities that may be included in such Incidental Registration determined
based upon the offering price to the public of the securities in the Public
Offering);
(iii) third, if the Investcorp Investors have an Investcorp Priority
with respect to such Incidental Registration, then the Existing Investors
may include in such Incidental Registration an aggregate number of
Registrable Securities up to the aggregate number of Registrable Securities
that may be included under clause (ii) immediately above;
(iv) fourth, if (A) the Investcorp Investors did not have an
Investcorp Priority with respect to such Incidental Registration (and,
therefore, the Existing Investors would not have had the priority under
clause (iii) immediately above) or (B) the Investcorp Investors had an
Investcorp Priority under clause (ii) and the Existing Investors had their
related priority under clause (iii), then the Registrable Securities
requested to be registered by Stockholders (including the Investcorp
Investors and the Existing Investors) pro rata among such Stockholders on
the basis of the number of Registrable Securities requested to be sold by
such Stockholders pursuant to this Section 3.2 (and if the Investcorp
Investors had an Investcorp Priority under clause (ii) and the Existing
Investors had their related priority under clause (iii), the number of
Registrable Securities that shall be taken into account for calculating
their respective pro rata shares under this clause (iv) shall be the number
of Registrable Securities requested to be included in such registration
above the amounts permitted under clauses (ii) and (iii) above, as
applicable); provided, however, that if such managing underwriter shall
advise the Company that, in such underwriter's opinion, the inclusion of
Registrable Securities held by Management Stockholders would adversely
affect the offering and sale (including pricing) of such securities, then
the number of Registrable Securities held by such Management Stockholders
to be included in such Public Offering may be disproportionately reduced to
avoid such adverse result; and
(v) fifth, all other Registrable Securities and securities proposed to
be sold for the account of any other Person.
SECTION 3.3 Registration Procedures. The Company will use its
reasonable efforts to effect each Required Registration pursuant to Section 3.1
and each Incidental
26
Registration pursuant to Section 3.2, and to cooperate with the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as possible, and the Company will as expeditiously as
possible:
(a) subject, in the case of an Incidental Registration, to
the proviso to Section 3.2(a), prepare and file with the SEC the
registration statement and use its reasonable efforts to cause the
Registration to become effective; provided, however, that, to the
extent practicable, the Company will furnish to the holders of the
Registrable Securities covered by such registration statement and
their counsel, copies of all such documents proposed to be filed and
any such holder shall have the opportunity to comment on any
information pertaining solely to such holder and its plan of
distribution that is contained therein and the Company shall make the
corrections reasonably requested by such holder with respect to such
information prior to filing any such registration statement or
amendment.
(b) subject, in the case of an Incidental Registration, to
the proviso to Section 3.2(a), prepare and file with the SEC such
amendments and post-effective amendments to any registration statement
and any prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of
all Registrable Securities covered by such registration statement
until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement
and cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act;
(c) furnish, upon request, to each holder of Registrable
Securities to be included in such Registration and the underwriter or
underwriters, if any, without charge, at least one signed copy of the
registration statement and any post-effective amendment thereto, and
such number of conformed copies thereof and such number of copies of
the prospectus (including each preliminary prospectus and each
prospectus filed under Rule 424 under the Securities Act), any
amendments or supplements thereto and any documents incorporated by
reference therein, as such holder or underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities being sold by such holder (it being understood that the
Company consents to the use of the prospectus and any amendment or
supplement thereto by each holder of Registrable Securities covered by
such registration statement and the underwriter or underwriters, if
any, in connection with the Public Offering and sale of the
Registrable Securities covered by the prospectus or any amendment or
supplement thereto);
(d) notify each holder of the Registrable Securities to be
included in such Registration and the underwriter or underwriters, if
any:
(i) of any stop order or other order suspending the
effectiveness of any registration statement, issued or threatened
by the SEC in connection therewith, and take all reasonable
actions required to prevent the entry
27
of such stop order or to remove it or obtain withdrawal of it at
the earliest possible moment if entered;
(ii) when such registration statement or any prospectus used
in connection therewith, or any amendment or supplement thereto,
has been filed and, with respect to such registration statement
or any post-effective amendment thereto, when the same has become
effective;
(iii) of any written request by the SEC for amendments or
supplements to such registration statement or prospectus; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky
laws of any jurisdiction;
(e) if requested by the managing underwriter or underwriters
or any holder of Registrable Securities to be included in such
Registration in connection with any sale pursuant to a registration
statement, promptly incorporate in a prospectus supplement or
post-effective amendment such information relating to such
underwriting as the managing underwriter or underwriters or such
holder reasonably requests to be included therein; and make all
required filings of such prospectus supplement or post-effective
amendment as soon as practicable after being notified of the matters
incorporated in such prospectus supplement or post-effective
amendment;
(f) on or prior to the date on which a Registration is
declared effective, use its reasonable efforts to register or qualify,
and cooperate with the holders of Registrable Securities to be
included in such Registration, the underwriter or underwriters, if
any, and their counsel, in connection with the registration or
qualification of the Registrable Securities covered by such
Registration for offer and sale under the securities or "blue sky"
laws of each state and other jurisdiction of the United States as any
such holder or underwriter reasonably requests in writing; use its
reasonable efforts to keep each such registration or qualification
effective, including through new filings, or amendments or renewals,
during the period such registration statement is required to be kept
effective; and do any and all other acts or things necessary or
advisable to enable the disposition of the Registrable Securities in
all such jurisdictions reasonably requested covered by such
Registration; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject
it to general service of process in any such jurisdiction where it is
not then so subject;
(g) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities to be included in
such Registration and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing securities to be
sold under such Registration, and enable such securities to be in such
denominations and registered in such names as the managing underwriter
or underwriters, if any, or such holders may request;
28
(h) use its reasonable efforts to cause the Registrable
Securities to be registered with or approved by such other
governmental agencies or authorities within the United States and
having jurisdiction over the Company or any Subsidiary as may be
necessary to enable the seller or sellers thereof or the underwriter
or underwriters, if any, to consummate the disposition of such
securities;
(i) use its reasonable efforts to obtain:
(A) at the time of effectiveness of each Registration,
a "comfort letter" from the Company's independent certified
public accountants covering such matters of the type
customarily covered by "cold comfort letters" as the holders
of a majority of the Registrable Securities to be included
in such Registration and the underwriters reasonably
request; and
(B) at the time of any underwritten sale pursuant to
the registration statement, a "bring-down comfort letter,"
dated as of the date of such sale, from the Company's
independent certified public accountants covering such
matters of the type customarily covered by comfort letters
as the Requisite Holders and the underwriters reasonably
request;
(j) use its reasonable efforts to obtain, at the time of
effectiveness of each Registration and at the time of any sale
pursuant to each Registration, an opinion or opinions addressed to the
holders of the Registrable Securities to be included in such
Registration and the underwriter or underwriters, if any, in customary
form and scope from counsel for the Company;
(k) notify each seller of Registrable Securities covered by
such Registration, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
Registration, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and promptly prepare and file with the SEC and furnish to
such seller or holder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers or prospective purchasers of
such securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they are
made;
(l) otherwise comply with all applicable rules and
regulations of the SEC, and make generally available to its security
holders (as contemplated by Section 11(a) under the Securities Act) an
earnings statement satisfying the provisions of Rule 158 under the
Securities Act no later than ninety (90) days after the end of the
twelve (12) month period beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of
the registration statement, which statement shall cover said twelve
(12) month period;
29
(m) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by each Registration
from and after a date not later than the effective date of such
Registration;
(n) use its reasonable efforts to cause all Registrable
Securities covered by each Registration to be listed subject to notice
of issuance, prior to the date of first sale of such Registrable
Securities pursuant to such Registration, on each securities exchange
on which the Common Stock are then listed, and admitted to trading on
NASDAQ, if the Common Stock or any such other securities of the
Company are then admitted to trading on NASDAQ; and
(o) enter into such agreements (including underwriting
agreements in customary form) and take such other actions as the
Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each holder of Registrable Securities that will be
included in such Registration to furnish the Company with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Company may reasonably request in writing and as is
required by Applicable Law.
SECTION 3.4 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company shall give the
holders of such Registrable Securities so registered, their underwriters, if
any, and their respective counsel and accountants access to its books and
records and an opportunity to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' or such
underwriters' to conduct a reasonable investigation within the meaning of
Section 11(b)(3) of the Securities Act.
SECTION 3.5 Rights of Requesting Holders. Each holder of Registrable
Securities to be included in a Registration which makes a written request
therefor in Section 3.1 or 3.2, as the case may be, shall have the right to
receive within thirty (30) days of receipt by the Company of such request copies
of the information, notices and other documents described in Section 3.3(l) and
Section 3.3(o).
SECTION 3.6 Registration Expenses. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities, including, without limitation, any such registration in which the
Company does not sell any securities for its own account.
SECTION 3.7 Indemnification; Contribution.
(a) The Company shall indemnify, to the fullest extent permitted by
law, each holder of Registrable Securities, its officers, directors, partners,
employees and agents, if any, and each Person, if any, who controls such holder
within the meaning of Section 15 of the Securities Act, against all losses,
claims, damages, liabilities (or proceedings in respect thereof) and expenses
(under the Securities Act or common law or otherwise), joint or several,
resulting from any violation by the Company of the provisions of the Securities
Act or any untrue
30
3
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if amended
or supplemented) or any preliminary prospectus or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of any prospectus, in
light of the circumstances under which they were made) not misleading, except to
the extent that such losses, claims, damages, liabilities (or proceedings in
respect thereof) or expenses are caused by any untrue statement or alleged
untrue statement contained in or by any omission or alleged omission from
information concerning any holder furnished in writing to the Company by such
holder expressly for use therein. If the Public Offering pursuant to any
registration statement provided for under this Article III is made through
underwriters, no action or failure to act on the part of such underwriters
(whether or not such underwriter is an Affiliate of any holder of Registrable
Securities) shall affect the obligations of the Company to indemnify any holder
of Registrable Securities or any other Person pursuant to the preceding
sentence. If the Public Offering pursuant to any registration statement provided
for under this Article III is made through underwriters, the Company agrees to
enter into an underwriting agreement in customary form with such underwriters
and the Company agrees to indemnify such underwriters, their officers,
directors, employees and agents, if any, and each Person, if any, who controls
such underwriters within the meaning of Section 15 of the Securities Act to the
same extent as herein before provided with respect to the indemnification of the
holders of Registrable Securities; provided that the Company shall not be
required to indemnify any such underwriter, or any officer, director or employee
of such underwriter or any Person who controls such underwriter within the
meaning of Section 15 of the Securities Act, to the extent that the loss, claim,
damage, liability (or proceedings in respect thereof) or expense for which
indemnification is claimed results from such underwriter's failure to send or
give a copy of an amended or supplemented final prospectus to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
amended or supplemented final prospectus prior to such written confirmation and
the underwriter was provided with such amended or supplemented final prospectus.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder, severally and not
jointly, shall indemnify, to the fullest extent permitted by law, the Company,
each underwriter and their respective officers, directors, employees and agents,
if any, and each Person, if any, who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages, liabilities (or proceedings in respect thereof) and expenses
resulting from any untrue statement or alleged untrue statement of a material
fact, or any omission or alleged omission of a material fact required to be
stated in the registration statement or prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or necessary to make the statements
therein (in the case of any prospectus, in light of the circumstances under
which they were made) not misleading, but only to the extent that such untrue
statement is contained in or such omission is from information so concerning a
holder furnished in writing by such holder expressly for use therein; provided
that such holder's obligations hereunder shall be limited to an amount equal to
the net proceeds to such holder of the Registrable Securities sold pursuant to
such registration statement.
31
4
(c) Any Person entitled to indemnification under the provisions of
this Section 3.7 shall (i) give prompt notice to the indemnifying party of any
claim with respect to which it seeks indemnification and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, permit
such indemnifying party to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified party; and if such defense is so
assumed, such indemnifying party shall not enter into any settlement without the
consent of the indemnified party if such settlement attributes liability to the
indemnified party and such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which shall not be
unreasonably withheld); and any underwriting agreement entered into with respect
to any registration statement provided for under this Article III shall so
provide. In the event an indemnifying party shall not be entitled, or elects
not, to assume the defense of a claim, such indemnifying party shall not be
obligated to pay the fees and expenses of more than one counsel or firm of
counsel for all parties indemnified by such indemnifying party in respect of
such claim, unless in the reasonable judgment of any such indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties in respect to such claim.
(d) If for any reason the foregoing indemnity is unavailable, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other or (ii) if the allocation provided by clause (i) above is not
permitted by Applicable Law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any other relevant
equitable considerations. Notwithstanding the foregoing, no holder of
Registrable Securities shall be required to contribute any amount in excess of
the amount such holder would have been required to pay to an indemnified party
if the indemnity under Section 3.7(b) was available. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The obligation of any Person to
contribute pursuant to this Section 3.7 shall be several and not joint.
(e) An indemnifying party shall make payments of all amounts required
to be made pursuant to the foregoing provisions of this Section 3.7 to or for
the account of the indemnified party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due or payable.
(f) The indemnity and contribution agreements contained in this
Section 3.7 shall remain in full force and effect regardless of any
investigation made by or on behalf of a participating holder of Registrable
Securities, its officers, directors, agents or any Person, if any, who controls
such holder as aforesaid, and shall survive the Transfer of Equity Securities by
such holder and the termination of this Agreement for any reason.
SECTION 3.8 Holdback Agreements; Registration Rights to Others. In the
event and to the extent requested by the managing underwriter or, if the
Registrable Securities
32
5
are not being disposed of in an underwritten Public Offering, if requested by
the Company, each Stockholder agrees not to sell, make any short sale of, grant
any option for the purchase of, or otherwise dispose of any securities of the
Company, other than those Registrable Securities included in such Registration
pursuant to Section 3.1(a), 3.1(b) or 3.2(a) for the thirty (30) days prior to
and the ninety days (90) days (one hundred and eighty (180) days in the case of
the initial Public Offering of the Company) after the effectiveness of the
registration statement pursuant to which such Public Offering shall be made (or
such shorter period of time as is sufficient and appropriate, in the opinion of
the managing underwriter or, as the case may be, the Company in order to
complete the sale and distribution of the securities included in such Public
Offering; provided that in no event shall such shorter period of time with
respect to any Stockholder be shorter than any such period for any other
Stockholder); provided that the limitations contained in this Section 3.8 shall
not apply to the extent a Stockholder is prohibited by Applicable Law from so
withholding such Registrable Securities from sale during such period.
SECTION 3.9 Availability of Information. Following the Company's
initial Public Offering, the Company shall comply with the reporting
requirements of Sections 13 and 15(d) of the Exchange Act and will comply with
all other public information reporting requirements of the SEC as from time to
time in effect, and cooperate with Stockholders who are holders of Registrable
Securities, so as to permit disposition of the Registrable Securities pursuant
to an exemption from the Securities Act for the sale of any Registrable
Securities (including, without limitation, the current public information
requirements of Rule 144(c) and Rule 144A under the Securities Act). The Company
shall also cooperate with each Stockholder who is a holder of any Registrable
Securities in supplying such information as may be necessary for such holder to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Securities Act for the sale of any Registrable Securities.
SECTION 3.10 Additional Registration Rights. Nothing contained in this
Agreement shall prevent the Company from granting additional registration rights
to any Person if approved by a Special Board Approval; provided, however, that
any grant of additional registration rights to any Harvest Fund must be approved
by the Investcorp Investors and the Requisite Disinterested Holders and the
grant of additional rights to Investcorp Investors must be approved by Harvest
Funds and the Requisite Disinterested Holders.
ARTICLE IV
GOVERNANCE AND STOCKHOLDER MATTERS
SECTION 4.1 Board of Directors.
(a) Each Stockholder agrees to vote, at any time and from time to
time, all of the shares of Common Stock and Preferred Stock held by such
Stockholder and all other shares of Common Stock and Preferred Stock over which
he, she or it has voting control and shall take all other necessary or desirable
action within his, her or its control (whether in his, her or its capacity as a
stockholder, director or officer of the Company or otherwise), and the Company
shall take all necessary or desirable action within its control, in order to
elect and maintain a
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seven (7) member Board, which shall include: (i) three (3) Directors designated
by the Harvest Funds, who initially shall be Xxx X. Xxxxxxxx, Xxxxx Xxxxx and
Xxxxxx Vollmershausen, (ii) the chief executive officer of Associated Materials
Incorporated, a Delaware corporation ("Associated"), who shall initially be
Xxxxxxx Xxxxxxxx, and, subject to Section 4.4(a) below, as otherwise designated
by the Board through a Special Board Approval from time to time in accordance
with and subject to this Agreement, and (iii) three (3) Directors designated by
the Investcorp Investors, who shall initially be Xxxxxxxxxxx X. Xxxxxxx, Xxxxx
X. Xxxxx and Xxxx X. Xxxxxx. Notwithstanding the foregoing, (A) at such time as
the Investcorp Investors own or hold in the aggregate, on an as-converted basis,
(x) a number of Equity Securities that is less than thirty percent (30%) of the
total number of Outstanding Equity Securities, the Investcorp Investors shall
only have the right to designate two (2) Directors, (y) a number of Equity
Securities that is less than fifteen percent (15%) of the total number of
Outstanding Equity Securities, the Investcorp Investors shall only have the
right to designate one (1) Director, and (z) a number of Equity Securities that
is less than eight percent (8%) of the total number of Outstanding Equity
Securities, the Investcorp Investors shall no longer have the right to designate
any Directors, and (B) if an Approved Recapitalization is caused at the election
of the Existing Investors pursuant to Section 4.5(a) below and immediately after
giving effect to the consummation of such Approved Recapitalization the Existing
Investors own or hold in the aggregate, (x) a number of Equity Securities and
Designated Options that is less than thirty percent (30%) of the total number of
Outstanding Equity Securities, the Harvest Funds shall only have the right to
designate two (2) Directors, (y) a number of Equity Securities and Designated
Options that is less than fifteen percent (15%) of the total number of
Outstanding Equity Securities, the Harvest Funds shall only have the right to
designate one (1) Director, and (z) a number of Equity Securities and Designated
Options that is less than eight percent (8%) of the total number of Outstanding
Equity Securities, the Harvest Funds shall no longer have the right to designate
any Directors. To the extent the Investcorp Investors lose the right to
designate any or all of their directors pursuant to clause (A) of the
immediately preceding sentence, then, to the extent the Harvest Funds have not,
at the time of such vacancy or vacancies, lost the right to designate any of
their directors pursuant to clause (B) of the immediately preceding sentence,
the Harvest Funds shall have the right to designate directors to fill the
vacancy or vacancies on the Board resulting under clause (A) of the immediately
preceding sentence. The Harvest Funds shall direct the Directors designated by
them to comply with the terms and conditions of this Agreement (including the
approval of transactions contemplated hereby) and, if any such Director fails to
comply with such terms and conditions, the Harvest Funds agree to remove such
Director and to immediately appoint a new Director to fill such vacancy. The
Investcorp Investors shall direct the Directors designated by it to comply with
the terms and conditions of this Agreement (including the approval of
transactions contemplated hereby) and, if any such Director fails to comply with
such terms and conditions, the Investcorp Investors agree to remove such
Director and to immediately appoint a new Director to fill such vacancy.
Notwithstanding the foregoing, the parties to this Agreement hereby acknowledge
that the initial Directors appointed to the Board by the Investcorp Investors
pursuant to Section 4.1(a)(iii) above shall not become members of the Board
until immediately after the Transaction Dividend and Management Bonuses (each as
defined in the Stock Purchase Agreement) have been approved by the Board.
(b) In the event that any Director designated by the Harvest Funds for
any reason ceases to serve as a Director during his or her term of office,
unless in accordance with
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7
Section 4.1 hereof the Harvest Funds no longer have the right to designate such
Director, the resulting vacancy on the Board shall be filled by a Director
promptly designated by the Harvest Funds. In the event that any Director
designated by the Investcorp Investors for any reason ceases to serve as a
Director during his or her term of office, unless in accordance with Section 4.1
hereof the Investcorp Investors no longer have the right to designate such
Director, the resulting vacancy on the Board shall be filled by the Director
promptly designated by the Investcorp Investors.
(c) The removal of any Director may be only at the written request of
the Person who designated such Director, unless in accordance with Section 4.1
hereof such Person no longer has the right to designate such Director and shall
be effective upon the Company's receipt of such written request. The
Stockholders shall take all steps necessary to implement any such removal in
accordance with the terms of this Agreement.
(d) In order to effectuate the provisions of this Agreement
(including, without limitation, the provisions set forth in Sections 4.1(a)
through (c) hereof and any election by the Existing Investors to effectuate an
Approved Recapitalization in accordance with Section 4.5(a)), and in connection
with any matter put to a vote of the Stockholders under this Agreement or
applicable law (but subject to the provisions of Section 6.14), each Existing
Investor hereby grants to the Harvest Funds, an irrevocable proxy (which proxy
is coupled with an interest) to vote at any annual or special meeting of
stockholders, or to take action by written consent in lieu of such meeting, with
respect to all of the shares of Capital Stock or other voting or non-voting
securities of the Company owned or held of record by such Existing Investor, as
determined by the Harvest Funds, with respect to (A) the election of Directors
designated in accordance with this Section 4.1, (B) the removal of Directors in
accordance with this Section 4.1, (C) the election of a Director to fill any
vacancy on the Board in accordance with this Section 4.1, (D) amending the
certificate of incorporation of the Company but, excluding changes that would
disproportionately and adversely affect the rights of any Existing Investor
(other than a Harvest Fund) and (E) the taking of any other action by the
Existing Investors under this Agreement or approving or voting on any matter in
accordance with applicable law (but subject to the provisions of Section 6.14);
provided, that in exercising such proxy, the Harvest Funds shall not agree to
waive or amend any rights of the Existing Investors under this Agreement. The
Harvest Funds shall use their commercially reasonable efforts to provide each
other Existing Investor with written prior notice of any exercise of the proxy
granted pursuant to this Section 4.1(d); provided, however, that failure to
provide such written prior notice shall not affect the exercise of such proxy by
the Harvest Funds. It is understood and agreed that the Existing Investors hold
as of the date hereof non-voting Equity Securities, that this proxy is intended
to cover any voting Equity Securities received or receivable upon the conversion
of any such securities and any other voting securities of the Company received
by an Existing Investor after the date hereof.
(e) So long as the Harvest Funds or any Financial Investor continues
to hold in the aggregate at least ten percent (10%) of the Equity Securities
acquired by each such Stockholder upon consummation of the Restructuring, the
Company shall deliver to the Harvest Funds or such Financial Investor, as
applicable, (i) on or prior to the thirtieth (30th) day after the end of each
monthly fiscal period of the Company, an unaudited income statement, balance
sheet and cash flow statement for and as of the end of such monthly period, (ii)
within forty-five (45) days after the end of each fiscal quarter of the Company,
an unaudited income statement, balance
35
8
sheet and cash flow statement for and as of the end of such fiscal quarter and
for the year to date, including management's discussion and analysis with
respect thereto and (iii) within ninety (90) days after the end of each fiscal
year of the Company, (A) an audited income statement, balance sheet and cash
flow statement for and as of the end of such fiscal year and (B) the annual
budget of the Company.
(f) So long as the Investcorp Investors continue to hold in the
aggregate at least ten percent (10%) of the Equity Securities acquired by the
Investcorp Investors upon consummation of the Restructuring, the Company shall
deliver to the Investcorp Investors (i) on or prior to the thirtieth (30th) day
after the end of each monthly fiscal period of the Company, an unaudited income
statement, balance sheet and cash flow statement for and as of the end of such
monthly period, (ii) within forty-five (45) days after the end of each fiscal
quarter of the Company, an unaudited income statement, balance sheet and cash
flow statement for and as of the end of such fiscal quarter and for the year to
date, including management's discussion and analysis with respect thereto and
(iii) within ninety (90) days after the end of each fiscal year of the Company,
(A) an audited income statement, balance sheet and cash flow statement for and
as of the end of such fiscal year and (B) the annual budget of the Company.
(g) Upon execution by the Company of a letter of intent with respect
to an acquisition by the Company pursuant to which the Company will issue New
Securities, the Company shall use its commercially reasonable efforts to notify
the Financial Investors of the terms of such proposed acquisition; provided,
however, that failure to provide such notice shall not effect the obligations of
any Stockholder pursuant to Section 2.5 hereof.
(h) In the event the Harvest Funds or the Investcorp Investors shall
not be entitled to designate a director pursuant to Section 4.1(a), the Harvest
Funds or Investcorp Investors, as the case may be, may review the books and
records and inspect any of the properties or assets of the Company and its
Subsidiaries from time to time at reasonable intervals during normal business
hours upon reasonable notice to the Company or a Subsidiary, as the case may be.
(i) The Company shall cause the boards of directors of each of
Holdings and Associated to have the exact composition as provided for in this
Section 4.1, and for such boards to be subject to the same rules and operating
procedures as set forth in this Section 4.1, mutatis mutandis. It is understood
by the parties hereto that the representatives of the Investcorp Investors on
the boards of directors of Holdings and Associated shall take no part in, and
shall abstain from any discussion regarding, the declaration or payment of
dividends (A) from Associated to Associated Materials Holding, Inc. ("AMHI"),
(B) from AMHI to Holdings and (C) from Holdings to the Company, in order to fund
the Transaction Dividend and the Management Bonuses.
SECTION 4.2 Observation Rights.
For so long as Apollo and its Affiliates continue to hold at least
$22,500,000 of the Mezzanine Notes, Apollo shall have the right to have one (1)
representative present (whether in person or by telephone) at all meetings of
the boards of the Company and its Subsidiaries (and audit committees thereof);
provided that such representative shall not be entitled to vote at such
36
meetings; and provided further that such representative is reasonably acceptable
to the Company. The Company shall send to such representative all of the
notices, information and other materials that are distributed to Directors, and
shall provide Apollo with a notice and agenda of each meeting of the boards (and
audit committees thereof) of the Company and its Subsidiaries, at the same time
as delivered to the Directors. Apollo shall provide notice to the Company of the
identity and address of, or any change with respect to the identity or address
of, their representative. Notwithstanding the foregoing, the Company or its
Subsidiaries, as applicable, shall be entitled to (a) excuse such representative
of Apollo from any portion of a meeting of the boards (or audit committee
thereof) which discusses any matters directly relating to Apollo, the Mezzanine
Notes or the Mezzanine Notes Indenture and (b) withhold information from the
Apollo representative delivered to the boards (or audit committees thereof)
prior to a meeting of the applicable board (or audit committee thereof), in each
case if the Company, or its Subsidiaries, as applicable, believes there is a
reasonable likelihood that the receipt of such information by the Apollo
representative would create a conflict of interest for the Apollo representative
or affect the attorney/client privilege of the Company and its legal advisors or
its Subsidiaries or their legal advisors, as applicable. The Company shall
reimburse or shall cause its Subsidiaries to reimburse the Apollo representative
for all reasonable travel and other out-of-pocket expenses incurred by the
Apollo representative in connection with attending board or committee meetings.
SECTION 4.3 Certain Governance Matters. The Company covenants and
agrees that it shall not take, and it shall not permit any Subsidiary to take,
any of the following actions without a Special Board Approval, and each of the
Stockholders shall not cause or permit the Company, or any Subsidiary, to take
any of the following actions without such approval:
(a) (i) authorize, issue or sell any Parity Securities or Senior
Securities (each as defined in the Certificate of Designations), (ii) other
than in connection with Stock Options granted under the Stock Option Plan
(and the shares of Common Stock issuable upon exercise of the Stock Options
granted thereunder) or upon the conversion of the shares of Preferred Stock
into Common Stock, issue or sell any Junior Securities (as defined in the
Certificate of Designations), or rights to purchase Junior Securities,
that, in the aggregate, would constitute five percent (5%) or more of the
Outstanding Equity Securities outstanding on the date of this Agreement, or
(iii) grant any Stock Options in excess of the number of Stock Options
reserved for grant under the Stock Option Plan (as such number may be
adjusted for stock splits, stock distributions and the like);
(b) refinance or amend any existing indebtedness with a principal
amount in excess of $10,000,000, other than to fund a repurchase of
Preferred Stock or Common Stock and transaction expenses in accordance with
Section 4.4(c), 4.5(a) or 4.7 hereof or to fund a redemption of the
Preferred Stock pursuant to a "Put Offer" pursuant to the Certificate of
Designations;
(c) incur any indebtedness, other than (i) indebtedness for
working capital, in an aggregate principal amount of $10,000,000 or less
outstanding at any time, (ii) to finance Permitted Acquisitions, (iii) term
and revolving indebtedness and letters of credit under the New Bank
Facility, (iv) intercompany indebtedness, (v) hedging
37
obligations solely for the purpose of fixing or hedging interest rate,
currency rate or commodity price risk, (vi) indebtedness incurred to fund a
repurchase of Preferred Stock or Common Stock and transaction expenses in
accordance with Section 4.4(c), 4.5(a) or 4.7 hereof or to fund a
redemption of the Preferred Stock pursuant to a "Put Offer" pursuant to the
Certificate of Designations, (vii) a guarantee of any indebtedness
permitted hereby, (viii) indebtedness under the Dividend Promissory Notes
as defined in, and on the terms described in, the Stock Purchase Agreement,
or (ix) as permitted by Section 4.3(b);
(d) declare or pay any dividends, other than dividends paid by a
Subsidiary of the Company to the Company or a Subsidiary of the Company and
other than the Transaction Dividend as defined in, and on the terms
described in, the Stock Purchase Agreement;
(e) repurchase any of the Equity Securities of the Company,
except for repurchases of Preferred Stock pursuant to a "Put Offer"
pursuant to the Certificate of Designations, repurchases of Preferred Stock
and Common Stock in accordance with Section 4.4(c), 4.5(a) or 4.7 hereof
and repurchases of shares of Common Stock held by employees of the Company
upon termination of their employment with the Company or its Subsidiaries
or upon their death, in a manner consistent with the Company's past
practices;
(f) engage in (i) any Change of Control Transaction or (ii) any
sale of the assets of the Company or any of its Subsidiaries in excess of
$25 million, other than sales of inventory and equipment in the ordinary
course of business;
(g) acquire any assets or business, by merger, stock or asset
purchase or otherwise, other than (A) inventory and equipment acquired in
the ordinary course of business in a manner consistent with the Company's
past practices, and (B) Permitted Acquisitions;
(h) make any assignment for the benefit of creditors of the
Company or any of its Subsidiaries or commence or authorize any proceedings
by the Company or any of its Subsidiaries under any bankruptcy,
reorganization, insolvency, receivership or other similar law or statute;
(i) increase or decrease the number of Directors;
(j) beginning with the annual operating budget for fiscal year
2005 and continuing thereafter, adopt an annual operating budget for the
Company and its Subsidiaries, or make any expenditures during an applicable
fiscal year that, together with other expenditures under the approved
operating budget for a fiscal year, would be in excess of 120% of the
amount contained in the approved budget;
(k) enter into or amend in any material respect any employment
arrangement with any person that is or would be a member of the senior
management of the Company or any of its Subsidiaries;
38
(l) make any material change or alteration in the wage, salary,
compensation, bonus, incentives, pension or other benefits payable or
otherwise due to any Executive Officer of the Company or any Subsidiary;
(m) make or cause to be made any initial Public Offering of the
securities of the Company or any Subsidiary;
(n) amend the Certificate of Designation or the Certificate of
Incorporation of the Company, whether by operation of law, by merger or
otherwise;
(o) consummate a Recap Event that is not governed by Section
4.4(c) or 4.5 of this Agreement; or
(p) any other action that requires a Special Board Approval under
this Agreement;
provided, however, that notwithstanding the foregoing, (i) the approval of a
Director designated by the Investcorp Investors shall not be required under (A)
Sections 4.3(b), (c), (f), (g), (j), (k), (l), (m) and (n) above, or (B) with
respect to those items requiring Special Board Approval under clause (c) of the
definition of "New Securities", the definition of Projected Adjusted Cash Flow,
Section 3.1(e) or Section 6.5(b) ((A) and (B) collectively, the "Fall-Away
Governance Rights"), at any time after the date on which the Investcorp
Investors, and their Permitted Transferees, collectively own or hold in the
aggregate a number of Equity Securities then outstanding (on an as-converted
basis) that is less than twenty percent (20%) of the total number of Outstanding
Equity Securities, and (ii) if an Approved Recapitalization is caused at the
election of the Existing Investors pursuant to Section 4.5(a) below and
immediately after giving effect to the consummation of such Approved
Recapitalization the Existing Investors own or hold in the aggregate a number of
Equity Securities and Designated Options that is less than twenty percent (20%)
of the total number of Outstanding Equity Securities, the approval of a Director
designated by the Harvest Funds shall no longer be required with respect to any
of the Fall-Away Governance Rights. Notwithstanding anything else to the
contrary in the Certificate of Designations, in connection with any Sale of the
Business (as defined in the Certificate of Designations) that requires Special
Board Approval or is otherwise approved by at least one director designated by
the Investcorp Investors, the Investcorp Investors agree that they cannot
exercise the Put Offer rights under Article 7 of the Certificate of
Designations.
SECTION 4.4 Rights of Investcorp Investors.
(a) At any time after the second anniversary of the date hereof, the
Investcorp Investors may demand that an independent valuation be performed on
the Company. Such independent valuation shall be performed by an investment
banking or valuation firm of national reputation independent of, and reasonably
acceptable to, the Investcorp Investors and the Harvest Funds (the "Independent
Firm"). The Company shall pay for all costs, fees and expenses associated with
such independent valuation, including, but not limited to, all fees and expenses
of the Independent Firm. If the valuation performed by the Independent Firm
determines that the Equity Value of the Company, using a multiple no greater
than a 7.5 times the EBITDA of the Company for the latest twelve (12) month
period, is an amount less than the Threshold Xxxxxx,
00
the Investcorp Investors may, in their sole and absolute discretion, but
exercisable during no more than one Permissible Change Period, make changes to
the Executive Officers of the Company and its Subsidiaries, which changes shall
include, but not be limited to, the right to terminate the employment of such
persons or to change the authority, duties or responsibilities of such persons
(and upon such election to make such changes, subject to compliance with the
balance of this Section 4(a), the Company and the members of the Board of
Directors shall cause such desired changes to be made); provided, however, at
the earlier of such time as (i) seventy-five percent (75%) or more of the
Preferred Stock acquired by the Investcorp Investors in the Restructuring has
been repurchased by the Company or converted into Common Stock and (ii) the
Investcorp Investors collectively own or hold in the aggregate a number of
Equity Securities that is less than twenty percent (20%) of the total number of
Outstanding Equity Securities, any such changes to such Executive Officers shall
only be made by the Board. In connection with the exercise of the foregoing
rights, in the event the Investcorp Investors elect to replace the Chief
Executive Officer of Associated, the Company shall hire a nationally recognized
executive recruiting firm chosen by the Investcorp Investors and reasonably
acceptable to the Harvest Funds who shall be instructed to conduct a national
search for a replacement Chief Executive Officer (the "Replacement CEO"). The
executive search firm shall consult with the Harvest Funds and the Investcorp
Investors on a regular basis in connection with its efforts to locate the
Replacement CEO, including by providing status reports, resumes of potential
candidates and such other information as the Harvest Funds or the Investcorp
Investors may reasonably request. Prior to the selection of the Replacement CEO
by the Investcorp Investors, the Investcorp Investors shall consult with the
Harvest Funds and, in any event, the Replacement CEO shall be a person of good
character with substantial experience in running enterprises generally in the
building materials industry, who is not currently, and has not been within the
last five years, whether in an employment, advisory or other capacity, in a
professional or business relationship with the Investcorp Investors or any of
their Affiliates, and has no relationship, past or present, with the Investcorp
Investors and any of their Affiliates, on the one hand, or the Harvest Funds and
any of their Affiliates, on the other hand, that could reasonably be expected to
call into question the independence of such person from either the Investcorp
Investors and any of their Affiliates, on the one hand, or the Harvest Funds and
any of their Affiliates, on the other hand. The Harvest Funds shall have the
right to reject any candidate nominated by the Investcorp Investors as the
Replacement CEO for any reason whatsoever, which right may only be exercised by
the Harvest Funds one time. Upon selection of a Replacement CEO in accordance
with the provisions of this Section 4.4(a), the Replacement CEO shall become a
member of the Board of Directors effective upon commencement of employment.
Notwithstanding anything contained in this Section 4.4 or in Section 4.3 to the
contrary, upon selection of the Replacement CEO, the Replacement CEO shall have
the authority, for a period of one year after the date such person commences
employment with Associated, to make such changes to the Executive Officers of
Associated as the Replacement CEO deems appropriate, and such changes shall not
require the separate consent of any members of the Board of Directors appointed
by the Harvest Funds.
(b) If, for the period from January 1, 2005 through December 31, 2008,
the Adjusted Cash Flow of the Company and its Subsidiaries is less than seventy
percent (70%) of the Projected Adjusted Cash Flow of the Company and its
Subsidiaries, the Investcorp Investors may notify the Company, at any time from
the earlier of (i) the date on which the audited financial statements for the
fiscal year ending on or about December 31, 2008 have been certified
40
by the Company's independent public accountants and (ii) March 31, 2009, through
December 31, 2009, that they intend to initiate a process that could result in a
Drag Along Event. Upon receipt of such notice, the Company shall engage an
investment banking firm reasonably satisfactory to the Investcorp Investors and
take such other steps as it or the Investcorp Investors determine are reasonably
necessary or appropriate to initiate a process that could result in a Drag Along
Event. The Company shall pay for all costs, fees and expenses associated with
such Drag Along Event, including, but not limited to, all fees and expenses of
the investment banking firm and the fees and expenses of the Stockholders. Upon
receipt from the retained investment bank of a range of reasonable Equity Values
for the Company, the Investcorp Investors shall provide a further notice to the
Company as to whether the Investcorp Investors intend to pursue a Drag Along
Event. For a period of sixty (60) days after receipt of such latter notice, the
Harvest Funds, any Permitted Transferee or any other Person designated by the
Harvest Funds and the Company shall have the right, but not the obligation, to
purchase all, but not less than all, of the outstanding shares of Preferred
Stock and Common Stock owned or held by the Investcorp Investors (the
"Preemptive Purchase") at a price per share payable in cash equal to the
Retained Liquidation Preference, net of any dividends declared but unpaid on a
share of Preferred Stock as of the date of the Preemptive Purchase, provided the
record date for such dividend occurs prior to the date of the Preemptive
Purchase (it being understood that any such declared but unpaid dividends shall
be payable to the holder of such Capital Stock at the applicable record date).
At the earlier of such time as (A) seventy-five percent (75%) or more of the
Preferred Stock acquired by the Investcorp Investors in the Restructuring has
been repurchased by the Company or converted into Common Stock and (B) the
Investcorp Investors collectively own or hold in the aggregate a number of
Equity Securities that is less than twenty percent (20%) of the total number of
Outstanding Equity Securities, the rights granted to the Investcorp Investors
pursuant to this Section 4.4(b) shall terminate.
(c) At any time after July 15, 2007, the Investcorp Investors may
notify the Company that they intend to cause the Company, or request that the
Board cause the Company, to initiate a process that could result in an Approved
Recapitalization. Upon receipt of such notice, the Company will engage an
investment banking firm to determine the Equity Value of the Company and to take
such other steps as it or the Investcorp Investors determine are reasonably
necessary or appropriate to effect such Approved Recapitalization. The Company
shall pay for all costs, fees and expenses associated with such Approved
Recapitalization, including, but not limited to, all fees and expenses of the
investment banking firm and the fees and expenses of the Stockholders. The
equity valuation to be used in and the amount and distribution of net proceeds
of any Approved Recapitalization effected pursuant to this Section 4.4(c) shall
be governed by Section 4.7.
(d) In connection with a transaction contemplated by Section 4.4(b) or
(c), each Stockholder hereby agrees, at the request of the Investcorp Investors,
to take such actions and execute and deliver such documents (and to instruct the
Company and its Subsidiaries to take such actions and execute such documents) as
the Investcorp Investors may reasonably deem necessary or appropriate in order
to consummate such transaction.
(e) Notwithstanding anything in this Section 4.4 to the contrary, (i)
the rights under subsections (a), (b) and (c) of this Section 4.4 shall each
only be exercised once during the term of this Agreement (provided that no such
exercise that does not result in the consummation
41
of the desired action or transaction shall count as an exercise of any such
rights, but in no event shall the failure of the consummation of the desired
action or transaction extend the time period under which the Investcorp
Investors may exercise any such right or take any such action, unless the
Company or the Existing Investors shall have materially breached their
obligations under this Agreement to facilitate any such desired action or
transaction, in which case any such time periods shall be extended by a number
of days equal to the duration of such material breach), (ii) the right under
Section 4.4(c) shall not be exercised following the exercise of the right under
Section 4.4(b) and (iii), provided the Investcorp Investors have received
proceeds equal to at least the Target Amount under an Approved Recapitalization
under Section 4.4(c), the right under Section 4.4(b) shall not be exercised
following the exercise of the right under Section 4.4(c).
SECTION 4.5 Rights of Existing Investors.
(a) If, at any time after July 15, 2007, the Equity Value of the
Company exceeds $815,000,000, the Existing Investors may, at their option, cause
the Company, or request that the Board cause the Company, to execute an Approved
Recapitalization. Upon receipt of such notice, the Company will engage an
investment banking firm and take such other steps as it or the Existing
Investors determine are reasonably necessary or appropriate to effect such
Approved Recapitalization. Such Equity Value shall be determined by an
Independent Firm chosen by the Investcorp Investors (the "First Valuation");
provided, however, that if the Existing Investors notify the Investcorp
Investors within ten (10) days of their receipt of the First Valuation that such
Existing Investors disagree with the First Valuation, then the Existing
Investors may elect to chose an Independent Firm to determine the Equity Value
of the Company (the "Second Valuation") and such Second Valuation shall be
completed promptly; provided further, however, that if the Existing Investors
and the Investcorp Investors are unable to agree on the Equity Value of the
Company based upon the First Valuation and the Second Valuation within ten (10)
days of the Investcorp Investors' receipt of the Second Valuation, then the
Existing Investors and the Investcorp Investors shall jointly chose a third
Independent Firm to determine the Equity Value of the Company (the "Third
Valuation") and such Third Valuation shall be completed promptly. The Company
shall pay for all costs, fees and expenses associated with such Approved
Recapitalization, including, but not limited to, all fees and expenses of all
valuations and the fees and expenses of the Stockholders.
(b) If the Existing Investors fail to notify the Investcorp Investors
of their disagreement with the First Valuation within ten (10) days of their
receipt thereof, then the Equity Value set forth in the First Valuation shall be
the Equity Value of the Company for purposes of this Section 4.5. If the
Investcorp Investors fail to notify the Existing Investors of their disagreement
with the Second Valuation within ten (10) days of their receipt thereof, then
the Equity Value set forth in the Second Valuation shall be Equity Value of the
Company for purposes of this Section 4.5. If the Existing Investors and the
Investcorp Investors elect to obtain a Third Valuation, then the Existing
Investors and the Investcorp Investors agree that for purposes of this Section
4.5 the Equity Value of the Company shall be an amount equal to the sum of the
First Valuation, the Second Valuation and the Third Valuation, divided by three
(3).
(c) In connection with a transaction contemplated by Section 4.5(a),
each Stockholder hereby agrees, at the request of the Harvest Funds, to take
such actions and execute
42
and deliver such documents (and to instruct the Company and its Subsidiaries to
take such actions and execute such documents) as the Harvest Funds may
reasonably deem necessary or appropriate in order to consummate such
transaction. The equity valuation to be used in and the amount and distribution
of net proceeds of any Approved Recapitalization effected pursuant to this
Section 4.5 shall be governed by Section 4.7.
SECTION 4.6 Additional Mutual Rights.
(a) At any time after the fifth anniversary of the date hereof, either
the Investcorp Investors or the Harvest Funds (pursuant to the rights granted to
the Drag Seller under Section 2.4(b)) may notify (the first to notify being a
"Notifying Stockholder") the Company and the other Stockholders (the "Receiving
Stockholders") that they intend to initiate a process that could result in a
Drag Along Event. Upon receipt of such notice, the Company will engage an
investment banking firm and take such other steps as it or the Notifying
Stockholder reasonably determines are necessary or appropriate to effect such
Drag Along Event. The Company shall pay for all costs, fees and expenses
associated with such Drag Along Event, including, but not limited to, all fees
and expenses of the investment banking firm and the fees and expenses of the
Stockholders.
(b) In connection with a transaction contemplated by Section 4.6(a),
each Receiving Stockholder hereby agrees, at the request of the Notifying
Stockholder, to take such actions and execute and deliver such documents (and to
instruct the Company and its Subsidiaries to take such actions and execute such
documents) as the Notifying Stockholder may reasonably deem necessary or
appropriate in order to consummate such transaction.
(c) In the event that the Investcorp Investors initiate a process that
could result in a Drag Along Event pursuant to this Section 4.6 or Section
4.4(b) in which the net proceeds available upon consummation of the Drag Along
Event is reasonably likely to be less than $300,000,000, then the Investcorp
Investors shall (i) retain, at the Company's expense, an investment banking or
valuation firm of national reputation reasonably acceptable to the Harvest
Funds, (ii) cause such firm to consult with the Harvest Funds and the Investcorp
Investors on a regular basis in connection with its valuation efforts, and
provide such information as the Harvest Funds or the Investcorp Investors may
reasonably request and (iii) use commercially reasonable efforts to get the best
reasonably available price, within a commercially reasonable period of time, for
the Equity Securities to be Transferred in connection with the Drag Along Event.
SECTION 4.7 Recapitalizations.
(a) The parties agree that any Recapitalization will be accomplished
by means of a repurchase of Equity Securities in accordance with this Agreement,
and not by means of a dividend or other distribution.
(b) In connection with any Recapitalization (including, but not
limited to, an Approved Recapitalization) (a "Recap Event"), the Equity Value of
the Company shall be determined as follows:
43
(i) if the Recap Event is not governed by Sections 4.4(c) or 4.5
hereof, the Equity Value of the Company shall be determined by an
Independent Firm chosen by the Board and approved with a Special Board
Approval (a "Company Recap Event"),
(ii) if the Recap Event is governed by Section 4.4(c) hereof, the
Equity Value of the Company shall be determined in accordance with Section
4.4(c) (an "Investcorp Recap Event"), and
(iii) if the Recap Event is governed by Section 4.5 hereof, the Equity
Value of the Company shall be determined in accordance with Section 4.5 (an
"Existing Investor Recap Event").
(c) The amount of the net proceeds from a Recap Event that shall be
used to repurchase the Equity Securities of the Stockholders (the "Recap Event
Amount") (i) in the case of a Company Recap Event, shall be determined by the
Board and approved with a Special Board Approval and (ii) in the case of an
Investcorp Recap Event or an Existing Investor Recap Event, shall be the maximum
amount which can be raised by the incurrence of indebtedness meeting the
conditions of clauses (b), (c) and (d) of the definition of "Approved
Recapitalization."
(d) The Company shall use the Recap Event Amount to repurchase Equity
Securities of the Stockholders as follows:
(i) First, the Company shall repurchase from the Investcorp Investors
shares of Preferred Stock at the Per Share Price, pro rata, in proportion
to the shares of Preferred Stock owned or held by such Investcorp
Investors, provided that the aggregate amount paid pursuant to this clause
shall not exceed the Retained Liquidation Preference, multiplied by the
number of shares of Preferred Stock then outstanding, and provided further
that, in the case of an Existing Investor Recap Event, each Investcorp
Investor shall be entitled to elect not to sell any or all of its shares
otherwise subject to repurchase under this clause and under clause (iii)
below;
(ii) Second, to the extent the Recap Event Amount exceeds the amount
to be paid pursuant to clause (i) above, the Company shall repurchase from
the Existing Investors Equity Securities (and, to the extent the Board
approves their repurchase in connection with such Recap Event, Options or
Stock Options then held by the Existing Investors) at the Per Share Price
(net of the exercise price for any such Options or Stock Options), pro
rata, in proportion to the Equity Securities (including any such Options or
Stock Options participating in such Recap Event upon Board approval) owned
or held by such Existing Investors, provided that the aggregate amount paid
pursuant to this clause shall not exceed the Target Amount (which amount
shall be reduced by all amounts paid to the Existing Investors pursuant to
this clause (ii) upon repurchase of Equity Securities in connection with
prior Recap Events), provided, that in the case of an Investcorp Recap
Event, each Existing Investor shall be entitled to elect not to sell all or
any of its shares otherwise subject to repurchase under this clause and
under clause (iii) below; and
44
(iii) Third, the remaining portion of the Recap Event Amount, if any,
shall be used to repurchase Equity Securities (and, to the extent the Board
approves their repurchase in connection with such Recap Event, Options or
Stock Options then held by Stockholders) at the Per Share Price (net of the
exercise price for any such Options or Stock Options) from all Stockholders
(including holders of Preferred Stock not repurchased pursuant to clause
(i) above) that elect to have their Equity Securities (and, to the extent
applicable, Options or Stock Options) repurchased, pro rata, in proportion
to the number of such Equity Securities (including any such Options or
Stock Options participating in such Recap Event upon Board approval) owned
or held by such Stockholders (giving effect to the conversion of the
Preferred Stock and to the repurchase of Equity Securities pursuant to
clauses (i) and (ii) above).
(e) Notwithstanding anything in the Certificate of Designations to the
contrary, in connection with a Recap Event in which the Investcorp Investors are
entitled to receive the amounts specified in Section 4.7(d), the Investcorp
Investors shall not be entitled to exercise their right to require a Put Offer
to be made pursuant to Section 7.1 of the Certificate of Designations.
SECTION 4.8 Mezzanine Notes. The Company hereby covenants that it
shall cause each of Associated, AMHI and Holdings, to the extent permissible
under the applicable Indentures and applicable law, to declare and pay dividends
in such amounts that enable the Company to timely and fully make all interest
payments owing on the Mezzanine Notes. Notwithstanding the foregoing, if, at any
time during the period of five (5) years after the date hereof, Holdings shall
not be permitted under the Indentures to make "Restricted Payments" (as defined
in the Indentures) in an amount equal to the amount required to pay accrued
interest payable in cash on the Mezzanine Notes in full as and when due, the
Investcorp Investors shall purchase, on or before the due date of such interest,
at an issue price of one hundred percent (100%) of the principal amount,
Mezzanine Notes in an aggregate principal amount sufficient to pay, together
with the amount of any Restricted Payments that are then permitted to be paid,
all such accrued interest payable in cash; provided, however, that the aggregate
amount paid by the Investcorp Investors for any such Mezzanine Notes shall not
exceed $7,500,000.
ARTICLE V
CERTAIN REGULATORY MATTERS
SECTION 5.1 Regulatory Problem. Notwithstanding any other provision of
this Agreement to the contrary, in the event that, at any time, the continued
holding by any Regulated Stockholder or any of its Affiliates of some or all of
the Equity Securities or any other securities of the Company held by it, at such
time, will result in a Regulatory Problem, such Regulated Stockholder or such
Affiliate shall promptly notify the Company and explain in reasonable detail the
facts which have given rise to the Regulatory Problem and such Regulated
Stockholder or such Affiliate shall use all reasonable best efforts to cure such
Regulatory Problem (including, but not limited to, transferring such Equity
Securities or other securities to an Affiliate of such Regulated Stockholder,
holding non-voting securities, or relinquishing the right to enforce certain or
all protective covenants, if any, in favor of such Regulated Shareholder
45
or such Affiliate) and thereafter may, subject to compliance with Article II,
promptly sell, exchange or otherwise dispose of such securities. In connection
with the foregoing sentence, if requested by such Regulated Stockholder or such
Affiliate, the Company shall cooperate with such Regulated Stockholder or such
Affiliate (a) in disposing of such securities to a third party or (b) exchanging
all or any portion of such securities on a share-for-share basis for shares of a
non-voting security of the Company (such non-voting security to be identical in
all respects to such voting securities or other securities, except that they
shall be non-voting and shall be convertible or exercisable into voting
securities on such conditions as are requested by such Regulated Stockholder in
light of the regulatory considerations prevailing). Without limiting the
foregoing, at the request of such Regulated Stockholder or such Affiliate, the
Company shall provide (and authorize such Regulated Stockholder or such
Affiliate to provide) financial and other information concerning the Company to
any prospective purchaser of such securities owned by such Regulated Stockholder
or such Affiliate, and shall amend this Agreement, the Certificate of
Incorporation of the Company, the by-laws of the Company, and any related
agreements and instruments and take any additional actions in order to
effectuate and reflect the foregoing. The Company shall not be required to
provide any such information unless the recipient thereof signs a
confidentiality agreement reasonably satisfactory to the Company.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior arrangements or understandings (whether written or
oral) with respect thereto.
SECTION 6.2 Captions; Rules of Interpretation. The Article and Section
captions used herein are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement. When a reference is made
in this Agreement to an Article, Section, Exhibit or Schedule, such reference is
to an Article or Section of, or a Schedule to, this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they are deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not
to any particular provision of this Agreement. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms. The use of "or" is not intended to be exclusive unless expressly
indicated otherwise.
SECTION 6.3 Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto
and each such executed counterpart shall be deemed to be an original instrument.
SECTION 6.4 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered by personal delivery, overnight courier or registered or certified
mail, return-receipt requested and postage prepaid addressed as follows:
46
If to the Company, to:
AMH Holdings II, Inc.
0000 Xxxxx Xxxx
Xxxxxxxx Xxxxx, Xxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with copies (which shall not constitute notice) to:
Harvest Partners, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxxxx
Xxxxxxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
and
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Investcorp Management Service Limited
x/x Xxxxxxxxxx Xxxx X.X.X.
X.X. Xxx 0000
Xxxxxxxxxx House
Manama, Bahrain
Attention: Xxxx X. Xxxx
Facsimile: 011-973-536-541
with a copy (which shall not constitute notice) to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: E. Xxxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
47
If to any Harvest Fund, to:
c/o Harvest Partners, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxxxx
Xxxxxxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to its counsel:
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Investcorp Investors, to:
Investcorp Management Service Limited
x/x Xxxxxxxxxx Xxxx X.X.X.
X.X. Xxx 0000
Xxxxxxxxxx House
Manama, Bahrain
Attention: Xxxx X. Xxxx
Facsimile: 011-973-536-541
with a copy (which shall not constitute notice) to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: E. Xxxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
and if to any of the Financial Investors or the Management Stockholders, to the
addresses set forth opposite each of their names on Schedule II or, as the case
may be, Schedule III attached hereto (or included in any joinder to this
Agreement), or to such other address as any such party hereto may, from time to
time, designate in writing to all other parties hereto, and any such
communication shall be deemed to be given, made or served as of the date so
delivered or, in the case of any communication delivered by mail, as of the date
so received.
SECTION 6.5 Successors and Assigns; Additional Stockholders.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company, the Stockholders and their respective successors, assigns and
Permitted Transferees. The rights of a Stockholder, a Financial Investor, a
Management Stockholder, an Investcorp
48
Investor or a Harvest Fund under this Agreement may not be assigned or otherwise
conveyed by any Stockholder, except in connection with a Transfer of Equity
Securities which, until termination of Article II pursuant to Section 6.10, is
in compliance with this Agreement.
(b) At the election of the Board pursuant to a Special Board Approval,
any holder of Equity Securities may become a party to this Agreement as a
Stockholder upon execution of a joinder to this Agreement by such holder;
provided, however, that Special Board Approval shall not be required for Persons
to become parties to this Agreement (i) who acquire Capital Stock of the Company
upon the exercise of Stock Options or (ii) pursuant to the provisions of Section
2.2(b) above.
SECTION 6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS.
SECTION 6.7 Submission to Jurisdiction.
(a) Each of the parties hereto, other than TGF, hereby irrevocably
acknowledges and consents that any legal action or proceeding brought with
respect to any of the obligations arising under or relating to this Agreement
may be brought in the courts of the State of New York or in the United States
District Court for the Southern District of New York and each of the parties
hereto, other than TGF, hereby irrevocably submits to and accepts with regard to
any such action or proceeding, for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of the aforesaid
courts. Each party, other than TGF, hereby further irrevocably waives any claim
that any such courts lack jurisdiction over such party, and agrees not to plead
or claim, in any legal action or proceeding with respect to this Agreement or
the transactions contemplated hereby brought in any of the aforesaid courts,
that any such court lacks jurisdiction over such party. Each party, other than
TGF, irrevocably consents to the service of process in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party, at its address for notices set forth in Section
6.4, such service to become effective ten (10) days after such mailing. Each
party, other than TGF, hereby irrevocably waives any objection to such service
of process and further irrevocably waives and agrees not to plead or claim in
any action or proceeding commenced hereunder or under any other documents
contemplated hereby that service of process was in any way invalid or
ineffective. Subject to Section 6.7(b), the foregoing shall not limit the rights
of any party to serve process in any other manner permitted by Applicable Law.
The foregoing consents to jurisdiction shall not constitute general consents to
service of process in the State of New York for any purpose except as provided
above and shall not be deemed to confer rights on any Person other than the
respective parties to this Agreement.
(b) Each of the parties, other than TGF, hereto hereby waives any
right it may have under the laws of any jurisdiction to commence by publication
any legal action or proceeding with respect to this Agreement. To the fullest
extent permitted by Applicable Law, each of the parties hereto hereby
irrevocably
49
waives the objection which it may now or hereafter have to the laying of the
venue of any suit, action or proceeding arising out of or relating to this
Agreement in any of the courts referred to in Section 6.7(a) and hereby further
irrevocably waives and agrees not to plead or claim that any such court is not a
convenient forum for any such suit, action or proceeding.
(c) The parties hereto agree that any judgment obtained by any party
hereto or its successors or assigns or Permitted Transferees in any action, suit
or proceeding referred to above may, in the discretion of such party (or its
successors or assigns or Permitted Transferees), be enforced in any
jurisdiction, to the extent permitted by Applicable Law.
(d) The parties hereto agree that the remedy at law for any breach of
this Agreement may be inadequate and that should any dispute arise concerning
the sale or disposition of any Securities or the voting thereof or any other
similar matter hereunder, this Agreement shall be enforceable in a court of
equity by an injunction or a decree of specific performance. Such remedies
shall, however, be cumulative and nonexclusive, and shall be in addition to any
other remedies which the parties hereto may have.
SECTION 6.8 Remedies; Jury Trial.
(a) The parties hereto agree that the remedy at law for any breach of
this Agreement may be inadequate and that should any dispute arise concerning
the sale or disposition of any securities or the voting thereof or any other
similar matter hereunder, this Agreement shall be enforceable in a court of
equity by an injunction or a decree of specific performance. Such remedies
shall, however, be cumulative and nonexclusive, and shall be in addition to any
other remedies which the parties hereto may have.
(b) The parties hereto waive all right to trial by jury in any action
or proceeding to enforce or defend any rights under this Agreement.
SECTION 6.9 Benefits Only to Parties. Nothing expressed by or
mentioned in this Agreement is intended or shall be construed to give any
Person, other than Persons indemnified pursuant to Section 3.7, the parties
hereto and their respective successors or assigns and Permitted Transferees, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and assigns and
Permitted Transferees, and for the benefit of no other Person.
SECTION 6.10 Termination; Survival of Benefits. This Agreement shall
terminate on the closing of an initial Public Offering; provided, however, that
(a) Article VI and (b) the rights and obligations of the Stockholders and the
Company under Article III shall survive any termination of this Agreement.
SECTION 6.11 Publicity. None of the parties hereto shall issue or
cause to be issued any press release or make or cause to be made any other
public statement or disclosure in each case relating to or connected with or
arising out of this Agreement or the matters contained herein, without obtaining
the prior written consent of parties mentioned in such press release or public
disclosure or statement and the Company in advance to the contents and the
manner of presentation and publication thereof. Notwithstanding the foregoing,
each of the parties hereto may, in documents required to be filed by it with the
SEC or other regulatory bodies, make such
50
statements with respect to the transactions contemplated hereby as each may be
advised by counsel is legally necessary or advisable, and may make such
disclosure as it is advised by its counsel is required by Applicable Law.
SECTION 6.12 Confidentiality. Each of the parties hereto hereby agrees
that throughout the term of this Agreement it shall keep (and shall cause its
directors, officers, employees, representatives and outside advisors and its
Affiliates to keep) all non-public information received as a Stockholder
relating to the Company (including any such information received prior to the
date hereof) confidential except information which (a) becomes known to such
Stockholder from a source, other than the Company, its directors, officers,
employees, representatives or outside advisors, which source is not obligated to
the Company to keep such information confidential or (b) becomes generally
available to the public through no breach of this Agreement by any party hereto.
Each of the parties hereto agrees that such non-public information (i) shall be
communicated only to those of its directors, officers, employees,
representatives, outside advisors and Affiliates who need to know such
non-public information and for the Financial Investors and the Investcorp
Investors to their investors, partners and members in a manner consistent with
past practice, and, if requested, to rating agencies and, if required by law,
applicable regulatory authorities and (ii) will not be used by such party or its
directors, officers, employees, representatives, outside advisors, Affiliates,
investors, partners or members either to, directly or indirectly, compete with
the Company or to conduct itself in a manner inconsistent with the antitrust
laws of the United States or any State. Notwithstanding the foregoing, a party
hereto may disclose non-public information if required to do so by a court of
competent jurisdiction or by any governmental agency; provided, however, that if
legally permissible prompt notice of such required disclosure shall be given to
the Company and the Harvest Funds prior to the making of such disclosure so that
the Company and/or the Harvest Funds may seek a protective order or other
appropriate remedy. In the event that such protective order or other remedy is
not obtained, the party hereto required to disclose the non-public information
will disclose only that portion which such party is advised by opinion of
counsel is legally required to be disclosed and will request that confidential
treatment be accorded such portion of the non-public information.
SECTION 6.13 Expenses. The Company shall reimburse each of the
respective members of its Board and Board observers pursuant hereto who are not
employees of the Company for their travel and out-of-pocket expenses incurred in
connection with their serving on the Board. Employees of the Company who incur
expenses in connection with their attendance of meetings of the Board in the
performance of their duties shall also be reimbursed in accordance with the
Company's usual expense reimbursement policies.
SECTION 6.14 Amendments; Waivers. The failure of any party to seek
redress for the violation of or to insist upon the strict performance of any
term of this Agreement shall not constitute a waiver of such term and such party
shall be entitled to enforce such term without regard to such forbearance. This
Agreement may be amended, each party hereto may take any action herein
prohibited or omit to take action herein required to be performed by it, and any
breach of or compliance with any covenant, agreement, warranty or representation
may be waived, only by the prior written consent or written waiver of the
Company, the Investcorp Investors, the Harvest Funds and at least a majority in
interests of the Requisite Disinterested Holders; provided, however, that no
amendment, modification or waiver shall adversely and
51
disproportionately affect the rights of any Stockholder without such
Stockholder's prior written consent.
SECTION 6.15 Transactions with Affiliates.
(a) Any Stockholder and any of its Affiliates may engage in or possess
an interest in any other business venture of any kind, nature or description,
independently or with others, whether or not such ventures are competitive with
the Company or its Subsidiaries, notwithstanding that representatives of such
Stockholder or any of their Affiliates may be serving as a Director of the
Company or its Subsidiaries. Nothing in this Agreement shall be deemed to
prohibit any Stockholder or any of their Affiliates from dealing, or otherwise
engaging in business, with Persons transacting business with the Company or its
Subsidiaries. Neither the Company nor any Stockholder shall have any rights or
obligations by virtue of this Agreement, in or to any independent venture of any
other Stockholder or any of their Affiliates, or the income or profits or losses
or distributions derived therefrom, and such ventures shall not be deemed
wrongful or improper even if competitive with the business of the Company or its
Subsidiaries.
(b) After the date hereof, the Company will not, and will not permit
any of its Subsidiaries to, enter into any transaction (other than for legal
services) with any Harvest Fund or any employee, officer, director or Affiliate
of any Harvest Fund, other than transactions which are on terms not
substantially less favorable to the Company or its Subsidiaries, as the case may
be, as it could obtain in a transaction with a party without a conflict of
interest, it being understood that a transaction approved by the Requisite
Disinterested Holders and the Investcorp Investors shall be deemed to be on
terms not substantially less favorable; provided, however, that this paragraph
(b) shall not prohibit the transactions contemplated by the amended and restated
management agreement to be executed by and between Harvest Partners, Inc. and
Associated as of the date hereof.
(c) After the date hereof, the Company will not, and will not permit
any of its Subsidiaries to, enter into any transaction (other than for legal
services) with any Investcorp Investor or any employee, officer, director or
Affiliate of any Investcorp Investor, other than transactions which are on terms
not substantially less favorable to the Company or its Subsidiaries, as the case
may be, as it could obtain in a transaction with a party without a conflict of
interest, it being understood that a transaction approved by the Requisite
Disinterested Holders and the Harvest Funds shall be deemed to be on terms not
substantially less favorable; provided, however, that this paragraph (c) shall
not prohibit the transactions contemplated by the management agreement to be
executed by and between Investcorp International, Inc. and Associated as of the
date hereof.
(d) Each of the Investcorp Investors covenants and agrees that
Investcorp Bank B.S.C. or one or more of its Affiliates (not including solely
for purposes of this Section 6.15(d) clause (c) of the definition of Affiliate)
will control, directly or indirectly, the voting and dispositive power with
respect to the Equity Securities held from time to time by the Investcorp
Investors.
52
SECTION 6.16 Agreement Governs in Event of Conflict. In the event the
provisions of this Agreement conflict with or are inconsistent with the
provisions of the Certificate of Incorporation, Certificate of Designations or
Bylaws of the Company, this Agreement shall govern.
ARTICLE VII
TERMINATION OF HOLDINGS STOCKHOLDERS AGREEMENT
SECTION 7.1 Termination of Holdings Stockholders Agreement. Holdings
and the Existing Investors hereby agree that the Holdings Stockholders Agreement
is hereby terminated in its entirety effective as of the date first above
written, notwithstanding the provisions of Section 6.10 of the Holdings
Stockholders Agreement. As a result of such termination, the Holdings
Stockholders Agreement shall forthwith be of no further force or effect.
* * *
53
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
AMH HOLDINGS II, INC.
By:_________________________________
Name:
Title:
AMH HOLDINGS, INC., for purposes of
Section 7.1 only
By:_________________________________
Name:
Title:
APOLLO INVESTMENT CORPORATION, for
purposes of Section 4.2 only
By:_________________________________
Name:
Title:
54
HARVEST PARTNERS III, L.P.
By: Harvest Associates III, LLC,
its general partner
By:_________________________________
Name:
Title:
HARVEST PARTNERS III, GbR
By: Harvest Associates III, LLC,
its general partner
By:_________________________________
Name:
Title:
HARVEST PARTNERS IV, L.P.
By: Harvest Associates IV, LLC,
its general partner
By:_________________________________
Name:
Title:
HARVEST PARTNERS IV GmbH & Co. KG
By: Harvest Associates IV, LLC,
its general partner
By:_________________________________
Name:
Title:
55
AMH HOLDING LIMITED
By:_________________________________
Name:
Title:
AM EQUITY LIMITED
By:_________________________________
Name:
Title:
AM INVESTMENTS LIMITED
By:_________________________________
Name:
Title:
ASSOCIATED EQUITY LIMITED
By:_________________________________
Name:
Title:
ASSOCIATED INVESTMENTS LIMITED
By:_________________________________
Name:
Title:
56
BANCBOSTON CAPITAL INC.
By:_________________________________
Name:
Title:
PRIVATE EQUITY PORTFOLIO FUND II, LLC
By:_________________________________
Name:
Title:
GE CAPITAL EQUITY CAPITAL GROUP, INC.
By:_________________________________
Name:
Title:
OLD HICKORY FUND I, LLC
By: PPM America, Inc.,
its manager
By:_________________________________
Name:
Title:
PPM AMERICA PRIVATE EQUITY FUND L.P.
By: PPM America Capital Partners, LLC,
its general partner
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
57
XXXXXX CAPITAL PRIVATE EQUITY FUND III,
L.P.
By: Xxxxxx Capital Private Equity
Partners III, L.P., its general
partner
By: Xxxxxx Capital Management, L.L.C.
its general partner
By:_________________________________
Name:
Title:
BNY PARTNERS FUND L.L.C.
By: BNY Private Investment Management,
Inc., Member Manager
By:_________________________________
Name:
Title:
NEW YORK LIFE CAPITAL PARTNERS II L.P.
By: NYLCAP Manager LLC, its Investment
Manager
By:_________________________________
Name:
Title:
THE BOARD OF TRUSTEES OF THE TEXAS GROWTH
FUND II, AS TRUSTEE FOR THE TEXAS GROWTH
FUND II - 1998 TRUST
By: TGF II Management, L.P., as
Executive Director
By: TGF Management Corp., as
General Partner
By:_________________________________
Name:
Title:
00
XXXXXX XXXXXXXX XXXXXXX XXX, L.P.
By:_________________________________
Name:
Title:
WESTON PRESIDIO CAPITAL IV, L.P.
By:_________________________________
Name:
Title:
WPC ENTREPRENEUR FUND, L.P.
By:_________________________________
Name:
Title:
WPC ENTREPRENEUR FUND II, L.P.
By:_________________________________
Name:
Title:
LIBERTY MUTUAL INSURANCE COMPANY
By:_________________________________
Name:
Title:
NATIONAL CITY EQUITY PARTNERS, INC.
By:_________________________________
Name:
Title:
60
GREAT LAKES CAPITAL INVESTMENTS IV, LLC
By:_________________________________
Name:
Title:
3755428 CANADA INC.
By:_________________________________
Name:
Title:
60
EXECUTIVE SIGNATURE PAGE
____________________________________
XXXXXXX XXXXXXXX, XX.
____________________________________
XXXXXXX X. XXXXX
____________________________________
D. XXXXX XXXXXXXX
SCHEDULE I
PREFERRED HOLDERS
AM Holding Limited
AM Equity Limited
AM Investments Limited
Associated Equity Limited
Associated Investments Limited
SCHEDULE II
FINANCIAL INVESTORS
Name Notice Address
BancBoston Capital Inc. 000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. XxxxxxxX
Private Equity Portfolio Fund, II, LLC 000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. XxXxxxx
GE Capital Equity Capital Group, Inc. Xxxxxxx Xxxxx
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: 000-000-0000
National City Equity Partners, Inc. Xxxxx Xxxxxxxx
Principal
0000 X. 0xx Xx.
Xxxxx 0000
Xxxxxxxxx, XX 00000
Great Lake Capital Investments, IV, L.L.C. Xxxxx Xxxxxxxx
Principal
0000 X. 0xx Xx.Xxxxx 0000
Xxxxxxxxx, XX 00000
Liberty Mutual Insurance Company 000 Xxxxxxxx Xxxxxx, 00X
Xxxxxx, XX 00000
Attention: Xxxx Xxx
PPM America Private Equity Fund LP c/o PPM America
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Old Hickory Fund I, LLC c/o PPM America
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxx Capital Private Equity Fund III, Xxxxxx Capital Management, LLC
L.P. 1211 Avenue of the Americas -
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
BNY Partners Fund L.L.C. x/x Xxx Xxxx xx Xxx Xxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
New York Life Capital Partners II L.P. 00 Xxxxxxx Xxxxxx
Xxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
The Texas Growth Fund II - 1998 Trust Xxxxx Xxxxxx
TGF Management Corp.
000 Xxxxxxxx Xx. 0000
Xxxxxx, XX 00000
Facsimile: 000 000-0000
Weston Presidio Capital III, L.P. Xxxxx Xxxxx
Xxxxxx Presidio Capital IV, L.P. Xxxxx XxXxxxx
WPC Entrepreneur Fund, L.P. 200 Clarendon
WPC Entrepreneur Fund II, L.P. 00xx Xxxxx
Xxxxxx, XX 00000
(000) 000-0000 (Fax)
3755428 Canada Inc. Xxxxxx X. Xxxxxxxxxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
(000) 000-0000 (Fax)
0000 Xxxxxxxxx Xxxxxxx XX
Xxxxx 0000
Xxxxxx, Xxxxxxx 00000
SCHEDULE III
EQUITY SECURITIES TO BE HELD BY THE STOCKHOLDERS
Class A Class A Class B Class B
Voting Non-Voting Series I Series II Series I Series II
Investor Preferred Preferred Common Common Common Common
Stock Stock Stock Stock Stock Stock
Harvest III LP
Harvest III GbR
Harvest IV LP
Harvest IV Kg
BancBoston Capital Inc.
Private Equity Portfolio Fund II, LLC
GE Capital Equity Capital Group Inc.
National City Equity Partners, Inc.
Great Lakes Capital Investments IV, LLC
Liberty Mutual Insurance Company
Old Hickory Fund I LLC
PPM America Private Equity Fund XX
Xxxxxx Capital Private Equity Fund III
BNY Partners Fund L.L.C.
New York Life Capital Partners II LP
Texas Growth Fund
Weston Presidio Capital III
Weston Presidio Capital IV
WPC Entrepreneur Fund, L.P.
WPC Entrepreneur Fund II, L.P.
Xxxxxxx Xxxxxxxx, Xx.
Xxxxxxx X. Xxxxx
D. Xxxxx XxXxxxxx
3755428 Canada Inc.
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1 Certain Definitions...............................................2
ARTICLE II
TRANSFER OF EQUITY SECURITIES
SECTION 2.1 Restrictions.....................................................15
SECTION 2.2 Permitted Transfers..............................................17
SECTION 2.3 Tag-Along Rights.................................................18
SECTION 2.4 Drag-Along Rights................................................20
SECTION 2.5 Grant of Preemptive Rights to Stockholders.......................22
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1 Required Registration............................................23
SECTION 3.2 Incidental Registration..........................................25
SECTION 3.3 Registration Procedures..........................................27
SECTION 3.4 Preparation; Reasonable Investigation............................30
SECTION 3.5 Rights of Requesting Holders.....................................30
SECTION 3.6 Registration Expenses............................................30
SECTION 3.7 Indemnification; Contribution....................................31
SECTION 3.8 Holdback Agreements; Registration Rights to Others...............33
SECTION 3.9 Availability of Information......................................33
SECTION 3.10 Additional Registration Rights..................................33
ARTICLE IV
GOVERNANCE AND STOCKHOLDER MATTERS
SECTION 4.1 Board of Directors...............................................34
SECTION 4.2 Observation Rights...............................................37
SECTION 4.3 Certain Governance Matters.......................................37
SECTION 4.4 Rights of Investcorp Investors...................................40
SECTION 4.5 Rights of Existing Investors.....................................42
SECTION 4.6 Additional Mutual Rights.........................................43
SECTION 4.7 Recapitalizations................................................44
SECTION 4.8 Mezzanine Notes..................................................45
i
ARTICLE V
CERTAIN REGULATORY MATTERS
SECTION 5.1 Regulatory Problem...............................................46
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Entire Agreement.................................................46
SECTION 6.2 Captions; Rules of Interpretation................................46
SECTION 6.3 Counterparts.....................................................47
SECTION 6.4 Notices..........................................................47
SECTION 6.5 Successors and Assigns; Additional Stockholders..................49
SECTION 6.6 GOVERNING LAW....................................................49
SECTION 6.7 Submission to Jurisdiction.......................................49
SECTION 6.8 Remedies; Jury Trial.............................................50
SECTION 6.9 Benefits Only to Parties.........................................51
SECTION 6.10 Termination; Survival of Benefits...............................51
SECTION 6.11 Publicity.......................................................51
SECTION 6.12 Confidentiality.................................................51
SECTION 6.13 Expenses........................................................52
SECTION 6.14 Amendments; Waivers.............................................52
SECTION 6.15 Transaction with Affiliates.....................................52
ARTICLE VII
TERMINATION OF HOLDINGS STOCKHOLDERS AGREEMENT
SECTION 7.1 Termination of Holdings Stockholders Agreement...................53
