STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement ("Agreement") is entered into as
of November 22, 2005, by and among Therma-Wave, Inc., a Delaware corporation
(the "Company"), and the parties set forth on Exhibit A hereto (each a
"Purchaser" and collectively, the "Purchasers").
Recitals
WHEREAS, it is a condition to the closing of the sale of the
Company's Series B Convertible Preferred Stock to the Purchasers pursuant to the
Stock Purchase Agreement of even date herewith (the "Purchase Agreement") that
the parties hereto enter into this Agreement to make certain provisions with
respect to the Company's organization and governance.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1. Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:
"Affiliate" has the meaning set forth in Regulation D under
the Securities Act of 1933.
"Board" means the Board of Directors of the Company.
"Change of Control" means any of the events described below:
(1) The occurrence of any event that would, if known to the
Company's management, be required to be reported by the Company under Item
5.01(a) of Form 8-K pursuant to the Securities Exchange Act of 0000 (xxx
"Xxxxxxxx Xxx"); or
(2) The acquisition or receipt, in any manner, by any person
(as defined for purposes of the Exchange Act) or any group of persons acting in
concert, of direct or indirect beneficial ownership (as defined for purposes of
the Exchange Act) of fifty percent (50%) or more of the combined voting
securities ordinarily having the right to vote for the election of directors of
the Company; provided that the following shall not constitute a Change in
Control: (i) any acquisition directly from the Company; (ii) any acquisition by
the Company or any of its affiliates, or (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any of
its affiliates; or
(3) A change in the constituency of the Board with the result
that individuals (the "Incumbent Directors") who are members of the Board as of
the date of this Agreement cease for any reason to constitute at least a
majority of the Board; provided that any individual who is elected to the Board
after the date of this Agreement and whose nomination for election was
unanimously approved by the Incumbent Directors shall be considered an Incumbent
Director beginning on the date of his or her election to the Board; or
(4) Consummation of a merger, consolidation or reorganization
involving the Company, unless such merger, consolidation or reorganization
results in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or parent thereof) more
than fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or parent thereof outstanding
immediately after such merger, consolidation or reorganization; or
(5) A complete liquidation or dissolution of the Company;
(6) A sale, exchange or other disposition or transfer of all
or substantially all of the Company's business or assets, other than pursuant to
a spin-off or comparable transaction in which the transferee is controlled by
the Company or its existing stockholders immediately prior to such transfer; or
(7) execution of a binding agreement with respect to a
transaction that, if completed, would constitute or result in a Change in
Control.
"Common Stock" means the common stock, $0.01 par value per
share, of the Company.
"GAAP" means United States generally accepted accounting
principles.
"Holders" means the Purchasers and their respective
Affiliates.
"Person" means an individual, partnership, corporation,
limited liability company, association, trust, joint venture, unincorporated
organization and any government, governmental department or agency or political
subdivision thereof.
"Permitted Transferee" means (i) any affiliate of a Purchaser,
(ii) any successor entity that succeeds to all or substantially all of the
assets of transferor,(iii) any limited partner, general partner or limited
liability company member who receives a distribution from a Purchaser, (iv) any
Person with at least $25.0 million in assets whose primary purpose is to invest
in other entities or securities, including registered and unregistered
investment companies and investment funds, financial institutions and other
investment or financial entities (a "Financial Entity"), and (v) any Person
following such time as the Purchasers are entitled to an additional director
pursuant to Section 2.1(a)(iii) hereof, but without giving effect to any
limitation imposed by the proviso in Section 2.1(a)(iii).
"Preferred Stock" means the Series B Convertible Preferred
Stock, par value $0.01 per share, of the Company.
"Purchaser" has the meaning set forth in the introductory
paragraph of this Agreement.
SECTION 2
BOARD OF DIRECTORS
2.1. Board Composition.
(a) Effective at the closing of the sale of the Company's Series B
Convertible Preferred Stock to the Purchasers pursuant to the Purchase
Agreement, the Purchasers shall be entitled to designate members to the Board
(the "Purchaser Designees"), as follows: (i) one individual designated by North
Run Master Fund, LP (the "North Run Designee"), (ii) one individual designated
collectively by Deephaven Relative Value Equity Trading Ltd and Deephaven Long
Short Equity Trading Ltd (the "Deephaven Designee"); and (iii) in the event the
Company's cash and cash equivalents, determined in accordance with GAAP applied
consistently with the Company's past practice, are less than $15.0 million as of
the end of a fiscal quarter as reported on the Company's balance sheet included
in Form 10-Q or Form 10-K for such quarter, the holders of a majority of
Preferred Stock shall be entitled to designate one additional director (or such
greater number as may be required such that the aggregate number of directors
designated pursuant to this Section 2.1 equals the minimum number of directors
necessary such that the aggregate number of directors equals at least thirty
percent (30%) of the then sitting board members); provided, however, that
notwithstanding the foregoing, in no event shall the percentage of board seats
that holders of Preferred Stock are entitled to elect exceed their proportion of
ownership of voting securities of the Company. Notwithstanding the foregoing,
any individual (or individuals) to be nominated or elected to the Board pursuant
to this Agreement that is designated by an initial Purchaser or a Permitted
Transferee (pursuant to sections (i) - (iv) of the Permitted Transferee
definition) shall be appointed only after reasonable consultation, review and
discussion with the Company's board of directors and its nominating committee.
The Company agrees that its review process for the initial designees shall be
completed no later than December 9, 2005. Any individual or individuals to be
nominated or elected to the Board pursuant to this Agreement by a Permitted
Transferee pursuant solely to section (v) of the Permitted Transferee definition
must first be reasonably acceptable to a majority of the existing directors
(excluding the North Run Designee and the Deephaven Designee), who shall not
unreasonably withhold or delay their approval of such individual.
(b) Notwithstanding the foregoing, (i) in the event the Purchasers
together hold less than 50% of the number of shares of Preferred Stock
originally purchased by them pursuant to the Purchase Agreement, the holders
of a majority in interest of the Preferred Stock shall be entitled to elect
a single director (and the Purchasers shall cause any director nominated
pursuant to Section 2.1(a) and not reelected pursuant to this section to
promptly tender his or her resignation from the Board) and (ii) in the
event the Purchasers together hold less than 20% of the number of shares
of Preferred Stock originally purchased by them pursuant
to the Purchase Agreement, the rights set forth in this Section 2.1 shall
terminate and Purchasers shall cause any director elected pursuant to Section
2.1(a) to promptly tender his or her resignation from the Board. In the event
that any Purchaser Designee fails to deliver his or her resignation as may be
required by this Section 2.1(b), the Company and the Purchasers shall be
entitled to take all necessary and appropriate action to cause such Purchaser
Designee to be removed.
(c) The Company shall take all actions reasonably
necessary and requested by any other stockholder within its control (including,
without limitation, calling special board and stockholders' meetings) so that
the Purchaser Designees shall be elected to or removed from the Board as
provided in this Section 2.1. The Company shall cause its Board of Directors to
take all action necessary to appoint directors designated pursuant to this
Section 2.1 to the Compensation Committee and Audit Committee and each other
committee as such directors may reasonably request, so that the directors will
have representation on each such committee proportional to their representation
on the Board, unless outside counsel has provided written advice that such
membership is prohibited by applicable law or the rules of the Nasdaq Stock
Market. The Company shall pay the reasonable out-of-pocket travel, lodging and
other related expenses of all directors elected pursuant to this Section 2.1
incurred in connection with attendance at meetings of the Board or any committee
thereof.
(d) If a vacancy of a position held by a Purchaser Designee occurs or
exists on the Board at any time and for any reason, including but not limited
to a vacancy because of the death, disability, retirement, resignation or
removal of any director for cause or otherwise, then the Purchaser who
originally designated such director pursuant to this Section 2.1 shall have
the sole right to designate an individual to fill such vacancy (provided
such Purchaser is still entitled to designate a member to the Board
thereunder), and the Company shall take all reasonable steps to elect such
nominee to fill such vacancy.
(e) At the request of the entity designating a Purchaser Designee and only
if such Purchaser is still entitled to designate a Board member pursuant to
Section 2.1 hereof, the Company shall (x) use all reasonable efforts to
(i) seek action by written consent as promptly as practicable following such
request to remove such Purchaser Designee, or (ii) if action by written consent
of stockholders is not then permitted by the certificate of incorporation and
bylaws of the Company, the Company may, in its sole discretion, cause a special
meeting of stockholders to be held proposing the removal of such Purchaser
Designee and (y) to the extent permitted by law and to the extent an action
by written consent is sought or a special meeting of stockholders is called
pursuant to this paragraph, use all reasonable efforts to solicit from
stockholders of the Company eligible to vote for the election of directors
proxies to remove such Purchaser Designee.
SECTION 3
TRANSFER RESTRICTIONS
3.1. Transfer Restrictions. Prior to the second anniversary of the date of the
original issuance of Preferred Stock to the Stockholders, except as approved by
the Board (excluding the directors nominated pursuant to Section 2.1 above),
each Purchaser and each Permitted Transferees agrees that it shall not sell or
otherwise transfer or agree to sell or otherwise transfer (a "Transfer") any
shares of Preferred Stock except to a Permitted Transferee; provided, however,
that the foregoing restrictions shall not restrict the Purchaser from
transferring at anytime and without consent, any or all of its shares of Common
Stock.
3.2. Certain Transferees to Become Parties. Any transferee receiving Preferred
Stock in a Transfer pursuant to Section 3.1 shall sign and delivery to the
Secretary of the Company a counterpart to this Agreement in substantially the
form attached hereto as Exhibit B.
SECTION 4
MISCELLANEOUS
4.1. Waivers and Amendments, Termination. The rights and obligations of the
Company and the Purchasers hereunder may only be waived (either generally or in
a particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely) or amended with the written consent of
the Company and Purchasers. This Agreement shall terminate at such time all
Preferred Stock is converted into Common Stock or earlier if following the
effectiveness of a Change of Control the Stockholders, in aggregate, own ten
percent (10%) or less of the outstanding capital stock of the surviving entity,
assuming the conversion of all convertible securities and exercise of all
options and warrants whose exercise price equals or exceeds the fair market
value of the underlying securities immediately following the effectiveness of
such Change of Control.
4.2. Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Delaware (without giving effect to any conflicts or choice
of laws provisions thereof that would cause the application of the domestic
substantive laws of any other jurisdiction).
4.3. Successors and Assigns. This Agreement shall be binding on each party
hereto with respect to all shares of Preferred Stock now or hereafter held by
each Holder. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto. Neither this
Agreement nor any right or obligation hereunder is assignable by any party
except with the prior written consent of the other party or parties; provided,
however, each Holder may assign or transfer any or all of its rights under this
Agreement to a Permitted Transferee in connection with a transfer of Preferred
Stock pursuant to Section 3; and provided further that upon a Change of Control,
this Agreement and all rights or obligations hereunder may be assigned by the
Company only to the surviving entity without the prior written consent of the
other party or parties.
4.4. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. This Agreement supersedes all prior and inconsistent
agreements and understandings between and among any of the parties hereto.
4.5. Notices. All demands, notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be
personally delivered or sent by facsimile machine (with a confirmation copy sent
by one of the other methods authorized in this Section), commercial (including
Federal Express) or U.S. Postal Service overnight delivery service, or deposited
in the U.S. Postal Service mailed first class, registered or certified mail,
postage prepaid, as set forth below:
If to the Company, addressed to:
Therma-Wave, Inc.
0000 Xxxxxxxx Xxx
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
Telecopier: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Telecopier: 000-000-0000
If to any Holder, at the address set forth on Exhibit A
with a copy to:
Ropes & Xxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxx
Telecopier: 000-000-0000
Notices shall be deemed given upon the earlier to occur of (i)
receipt by the party to whom such notice is directed; (ii) if sent by facsimile
machine, on the date (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) such notice is sent, if sent (as
evidenced by the facsimile confirmed receipt) prior to 5:00 p.m. Pacific
Standard Time and, if sent after 5:00 p.m. Pacific Standard Time, on the day
(other than a Saturday, Sunday or legal holiday in the jurisdiction to which
such notice is directed) after which such notice is sent; (iii) on the first
business day (other than a Saturday, Sunday or legal holiday in the jurisdiction
to which such notice is directed) following the day the same is deposited with
the commercial carrier if sent by commercial overnight delivery service; or (iv)
the fifth day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) following deposit thereof with
the U.S. Postal Service as aforesaid. Each party, by notice duly given in
accordance therewith may specify a different address for the giving of any
notice hereunder.
4.6. Severability. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
4.7. Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
4.8. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together constitute one instrument.
4.9. Remedies.
(a) The rights and remedies provided by this Agreement are cumulative and
the use of any one right or remedy by any party shall not preclude or waive its
rights to use any or all other remedies. Said rights and remedies are given in
addition to any other rights the parties may have at law or in equity.
(b) Without limitation of the foregoing, the parties hereto agree that
irreparable harm would occur in the event that any of the agreements and
provisions of this Agreement were not performed fully by the parties hereto in
accordance with their specific terms or were otherwise breached, and that money
damages are an inadequate remedy for breach of the Agreement because of the
difficulty of ascertaining and quantifying the amount of damage that will be
suffered by the parties hereto in the event that this Agreement is not performed
in accordance with its terms or is otherwise breached. It is accordingly hereby
agreed that the parties hereto shall be entitled to an injunction or injunctions
to restrain, enjoin and prevent breaches of this Agreement by the other parties
and to enforce specifically such terms and provisions of this Agreement, such
remedy being in addition to and not in lieu of, any other rights and remedies to
which the other parties are entitled to at law or in equity.
(c) Except where a time period is otherwise specified, no delay on the part of
any party in the exercise of any right, power, privilege or remedy hereunder
shall operate as a waiver thereof, nor shall any exercise or partial exercise
of any such right, power, privilege or remedy preclude any further exercise
thereof or the exercise of any right, power, privilege or remedy.
4.10. Legends. The Purchaser agrees that the certificates for the Preferred
Stock shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, AS SET FORTH IN A
SHAREHOLDERS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE COMPANY.
The legend set forth above shall be removed from the certificates for the
Preferred Stock following the second anniversary of the date of the original
issuance of Preferred Stock to the Stockholders.
4.11. No Grant of Proxy, Not a
Voting Trust. This Agreement does not grant any proxy and should not be
interpreted as doing so. Nevertheless, should the provisions of this Agreement
be construed to constitute the granting of proxies, such proxies shall be deemed
coupled with an interest and are irrevocable for the term of this Agreement.
This Agreement is not a voting trust governed by Section 218 of the Delaware
General Corporation Law and should not be interpreted as such.
4.12. No Third Party Beneficiary. There are no third party beneficiaries of this
Agreement.
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the date first set forth above.
"Company"
Therma-Wave, Inc.
By: ____________________________
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
"Purchasers"
North Run Master Fund, L.P.
By: North Run GP, LP, its General Partner
By: North Run Advisors, LLC, its General Partner
By: ________________________
Xxxxxx X. Xxxxx, Member
By: ________________________
Xxxx X. Xxxxxx, Member
Deephaven Relative Value Equity Trading Ltd.
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: CEO
Deephaven Long Short Equity Trading Ltd.
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: CEO
EXHIBIT A
NAME AND ADDRESS OF PURCHASERS
Name
North Run Master Fund, L.P.
Xxx Xxxxxxxxxxxxx Xxxxx - Xxxxx 0000
Xxxxxx, XX 00000
Deephaven Relative Value Equity Trading Ltd
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Deephaven Long Short Equity Trading Ltd
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
EXHIBIT B
COUNTERPART TO STOCKHOLDERS AGREEMENT
Reference is made to that certain Stockholders' Agreement dated as of
November ___, 2005, by and among Therma-Wave, Inc. and the Stockholders party
thereto (as amended from time to time, the "Agreement"). As a proposed recipient
of shares of stock covered by the Agreement, the undersigned hereby acknowledges
and agrees that such shares upon receipt shall remain subject to all of the
terms and provisions of the Agreement and all rights and obligations thereunder
arising prior to such receipt, and the undersigned hereby agrees to be bound by
all of the terms and provisions of the Agreement. The undersigned hereby joins
and executes said Agreement, hereby authorizing this Counterpart to be attached
thereto.
Dated this ______ day of _____________, 20___.
Signature:
----------------------------
Print Name:
----------------------------
Address for Notice:
----------------------------
