EXHIBIT 10.3
PREFERRED STOCK TAGALONG AGREEMENT
THIS PREFERRED STOCK TAGALONG AGREEMENT (this "Agreement") is entered
into as of October 9, 1998 by and among (i) Desa Holdings Corporation, a
Delaware corporation (as hereinafter further defined, the "Company"), (ii) J.W.
Childs Equity Partners, L.P., a Delaware limited Partnership ("JWC Equity
Partners"), (iii) JWC Equity Funding, Inc., a Delaware corporation, and (iv)
those persons listed as the Preferred Holders on the signature pages hereof (as
hereinafter further defined, the "Preferred Holders").
RECITALS
A. JWC Equity Partners owns a majority of the issued and outstanding
shares of Common Stock (as hereinafter defined) of the Company.
B. Concurrently with the execution and delivery of this Agreement, the
Preferred Holders have purchased certain shares of Preferred Stock (as
hereinafter defined) of the Company.
C. The Company and the Stockholders desire to enter into this Agreement
for the purpose of regulating certain aspects of the Stockholders' relationships
with one another.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties to this Agreement mutually agree as follows:
ARTICLE I
Definitions
For the purposes of this Agreement, the following terms shall be
defined as follows:
"1933 Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute thereto, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, all as the same shall
be in effect from time to time.
"1934 Act" shall mean the Securities and Exchange Act of 1934, as
amended, or any successor federal statute thereto, and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder, all as the
same shall be in effect from time to time.
"Affiliate" of a specified Person shall mean (a) a Person who, directly
or indirectly, through one or more intermediaries, controls or is controlled by
or is under common control with the specified Person or (b) a director,
executive officer or general partner of such Person.
"Bonus Option Agreement" shall mean that certain Bonus Option
Agreement, dated as of November 26, 1997, among Robert H. Elman, John M. Kelly,
Terry G. Scariot and the Company, as amended or amended and restated and in
effect from time to time.
"Business Day" shall mean any day, other than a Saturday, Sunday or
legal holiday, on which banks in New York, New York and Boston, Massachusetts
are permitted to be open for business.
"Cash Equivalents" shall mean (a) United States dollars and (b) any
securities or other property, other than any shares of common stock (or similar
equity securities of a partnership, limited liability company or trust) where
either the issuance or distribution of such securities have not been registered
under Section 5 of the 1933 Act or are subject to any "lockup agreement" or
other contractual restriction on transfer.
"Certificate of Designation" shall mean the Certificate of Designation
of the Company for the Preferred Stock filed on or about November 26, 1997 with
the Secretary of State for the State of Delaware, as from time to time in
effect.
"Common Stock" shall mean (a) shares of Common Stock, par value $.01
per share, of the Company or of Nonvoting Common Stock, par value $.01 per
share, of the Company and (b) securities (other than securities which constitute
Cash Equivalents) which holders of Common Stock receive in exchange for shares
of Common Stock, or into which shares of Common Stock are converted, pursuant to
any merger, consolidation, sale of all or substantially all of the Company's
assets or business, liquidation, dissolution or reorganization.
"Company" shall mean Desa Holdings Corporation, a Delaware corporation,
and its successors and assigns.
"Exchange" shall mean the exchange by the Company pursuant to Section 5
of the Certificate of Designation of the shares of Preferred Stock at the time
outstanding for Exchange Notes.
"Exchange Notes" shall mean any of the 12% Junior Subordinated Notes
due December 31, 2009 of the Company that may be issued by the Company pursuant
to Section 5 of the Certificate of Designation.
"Initiating Stockholders" shall have the meaning set forth therefor in
Section 2.2 of this Agreement.
"IPO" shall have the meaning set forth therefor in Section 2.1(a) of
this Agreement.
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"JWC Equity Partners" shall mean J.W. Childs Equity Partners, L.P., a
Delaware limited partnership.
"JWC Equity Partners Holders" shall mean JWC Equity Partners and any
subsidiary of JWC Equity Partners (including but not limited to JWC Equity
Funding, Inc.) and shall also include Permitted Transferees of any JWC Equity
Partners Holder and direct and indirect Permitted Transferees of such Permitted
Transferees.
"JWC L.P." shall mean J.W. Childs Associates, L.P., a Delaware limited
partnership.
"JWC Representative" shall have the meaning set forth therefor in
Section 3.8 of this Agreement.
"Liquidation Value" shall, (a) as of any date prior to the Exchange,
have the meaning set forth therefor in the Certificate of Designation and, (b)
as of any date after the Exchange, mean the sum of (i) outstanding principal
amount of any Exchange Note as of such date plus (ii) all accrued and unpaid
interest thereon.
"Permitted Transfer" shall mean:
(a) a Transfer of Subject Securities by a JWC Equity Partners
Holder (i) to (A) the partners of JWC Equity Partners (or any
Affiliates of such partners) or (B) the partners, officers or employees
of JWC L.P., in either case in connection with the liquidation of JWC
Equity Partners, or (ii) to an entity or entities which are (and
continue to be) wholly owned by JWC Equity Partners;
(b) a Transfer of any Subject Securities between any JWC
Equity Partners Holder, who has become a JWC Equity Partners Holder as
a result of any Transfer permitted under clause (a)(i) of this
definition and is a natural person, and such JWC Equity Partners
Holder's spouse, children, parents or siblings (whether natural, step
or by adoption) or to a trust solely for the benefit of one or more of
any of such Persons where either (i) such JWC Equity Partners Holder
retains, as trustee or by some other means, the sole authority to vote
such Subject Securities or (ii) such JWC Equity Partners Holder does
not retain authority to vote such Subject Securities because retention
of such authority to vote such Subject Securities would be reasonably
likely to result in the inclusion of such Subject Securities in the
gross estate of such JWC Equity Partners Holder for purposes of federal
estate taxes;
(c) a Transfer of Subject Securities between any JWC Equity
Partners Holder who has become a JWC Equity Partners Holder as a result
of any Transfer permitted under clause (a)(i) of this definition and
any Affiliate of such JWC Equity Partners Holder, provided that such
Affiliate shall remain at all times an Affiliate of such JWC Equity
Partners Holder;
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(d) a Transfer of Subject Securities between or among the JWC
Equity Partners Holders;
(e) a Transfer of Subject Securities between any JWC Equity
Partners Holder, who has become a JWC Equity Partners Holder as a
result of any Transfer permitted under clause (a)(i) of this definition
and is a natural person, and such JWC Equity Partners Holder's estate,
executors, legal representative, guardian or conservator, or the
Transfer of Subject Securities between the estate of any JWC Equity
Partners Holder and such JWC Equity Partners Holder's spouse, children,
parents or siblings (whether natural, step or by adoption) or to a
trust solely for the benefit of one or more of any of such Persons;
(f) (i) a bona fide pledge of Subject Securities by a JWC
Equity Partners Holder to (A) Fleet National Bank (or any Affiliate
thereof) in connection with that certain Credit and Guaranty Agreement
dated as of November 25, 1996, as from time to time in effect, by and
among Fleet National Bank, JWC Equity Funding, Inc. and JWC Equity
Partners or (B) any extension, renewal, replacement, restructuring or
refinancing of such Credit and Guaranty Agreement, whether by the same
or any other lender or lenders, or (ii) a Transfer by a pledgee upon
any bona fide foreclosure on any pledge permitted under clause (f)(i)
of this definition;
(g) (i) a bona fide pledge of Subject Securities by a JWC
Equity Partners Holder, who has become a JWC Equity Partners Holder as
a result of any Transfer permitted under clause (a)(i) of this
definition, to an institutional lender, or (ii) a Transfer by a pledgee
upon any bona fide foreclosure on any pledge permitted under clause
(g)(i) of this definition;
(h) a Transfer of Preferred Shares between any Preferred
Holder and any Affiliate of such Preferred Holder, provided that such
Affiliate shall remain at all times an Affiliate of such Preferred
Holder; and
(i) a Transfer of Preferred Shares between any Preferred
Holder and any shareholder or partner of such Preferred Holder.
No Permitted Transfer shall be effective unless and until the transferee of the
Subject Securities so Transferred executes and delivers to the JWC
Representative and the Preferred Holders an executed counterpart of this
Agreement in accordance with Section 3.11 hereof; provided, that a Permitted
Transferee which is a pledgee in connection with a Permitted Transfer effected
pursuant to clause (f)(i) or (g)(i) of the definition of "Permitted Transfer"
herein shall not be required to execute and deliver to the JWC Representative
and the Preferred Holders an executed counterpart of this Agreement in
accordance with Section 3.11 hereof until foreclosure on such pledge.
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"Permitted Transferee" shall mean any Person who shall have acquired
and who shall hold any Subject Securities pursuant to a Permitted Transfer.
"Person" means an individual, corporation, partnership, limited
liability company, trust, unincorporated association, government or any agency
or political subdivision thereof, or other entity.
"Preferred Holders" shall have the meaning set forth in the preamble
preceding the Recitals to this Agreement and shall also include Permitted
Transferees of the Preferred Holders and direct and indirect Permitted
Transferees of such Permitted Transferees.
"Preferred Shares" shall mean, (a) as of any date prior to the
Exchange, any shares of the Preferred Stock issued and outstanding as of such
date and (b) as of any date after the Exchange, any Exchange Notes issued and
outstanding as of such date.
"Preferred Stock" shall mean the Series C 12% Senior Redeemable
Exchangeable Pay- in-Kind Preferred Stock, par value $.01 per share, of the
Company.
"Put Event" shall have the meaning set forth therefor in Section 2.2(e)
of this Agreement.
"Put Notice" shall have the meaning set forth therefor in Section
2.2(e) of this Agreement.
"Put Option" shall have the meaning set forth therefor in Section
2.2(e) of this Agreement.
"Put Securities" shall have the meaning set forth therefor in Section
2.2(e) of this Agreement.
"Schedule of Stockholders" shall mean the Schedule of Stockholders
attached hereto as Exhibit A, as from time to time amended by the Company
pursuant to Section 3.2(b) hereof.
"Stockholder" shall mean any party hereto (other than the Company or
any of its subsidiaries), including any Person (other than the Company or any of
its subsidiaries) who hereafter becomes a party to this Agreement pursuant to
Section 3.11 hereof.
"Stockholder Group" shall mean any of (a) the JWC Equity Partners
Holders taken as a group and (b) the Preferred Holders taken as a group. None of
the Company and its subsidiaries shall in any case be deemed to be a member of
any Stockholder Group (whether or not the Company or any of its subsidiaries
holds or repurchases any securities of the Company).
"Subject Securities" shall mean, as of any date, (a) any shares of
Common Stock issued and outstanding as of such date and (b) any options,
warrants, securities and other rights to
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acquire, by exercise, conversion, exchange or otherwise, shares of Common Stock
or securities convertible into Common Stock, but only to the extent that such
options, warrants, securities and other rights are both, as of such date, (i)
vested under the terms thereof or under any plan, agreement or instrument
pursuant to which such options, warrants, securities and other rights were
issued, and (ii) so exchangeable, exercisable or convertible.
"Third Party" means any Person other than (a) the Company or any of its
subsidiaries and (b) any Preferred Holder.
"Transfer" shall mean to transfer, sell, assign, exchange, convert,
pledge, hypothecate, give, grant or create a security interest in or lien on,
place in trust (voting or otherwise), assign an interest in or in any other way
encumber or dispose of, directly or indirectly and whether or not by operation
of law or for value, any of the Subject Securities.
"Voting Stock" shall have the meaning set forth therefor in the
Certificate of Designation.
ARTICLE II
Transferability
2.1 Restriction on Transfers.
(a) Notwithstanding anything to the contrary contained in any
other agreement or instrument, no JWC Equity Partners Holder may
Transfer all or any portion of the Subject Securities at the time held
by such JWC Equity Partners Holder to any Person (other than in
accordance with Section 2.2 hereof) if:
(i) (A) Such Transfer is in consideration of or in
exchange for, in whole or in part, Cash Equivalents, and (B)
immediately after giving effect to such proposed Transfer, the
JWC Equity Partners Holders would in the aggregate
beneficially own a number of Subject Securities (subject to
adjustment of such number of Subject Securities by the Company
pursuant to Section 2.1(b) of this Agreement) which is less
than 46.5189% of the sum of (I) the 16,102,527.9694 Subject
Securities that are issued and outstanding at the date hereof
plus (II) the number of stock options (determined immediately
after giving effect to such proposed Transfer) granted under
the 1998 Stock Option Plan of the Company or pursuant to the
Bonus Option Agreement, but in each case only to the extent
that such options shall at the time be Subject Securities.
(ii) The consummation of such Transfer
(A) prior to the initial underwritten public
offering of the Common Stock pursuant to an effective
registration statement under the 1933 Act
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(the "IPO"), would result in either (I) the JWC
Equity Partners Holders becoming the "beneficial
owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the 1934 Act, except that for
purposes of calculating the beneficial ownership of
any "person" (as such term is used in Section
13(d)(3) of the 1934 Act), such person shall be
deemed to have "beneficial ownership" of all
securities that such person has the right to acquire,
whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent
condition) of less than 37.2% of the Voting Stock of
the Company or Desa International, Inc. (measured by
voting power rather than number of shares) or (II)
any person (as defined above), other than the JWC
Equity Partners Holders, becoming the "beneficial
owner" (as defined above), directly or indirectly, of
40% or more of the Voting Stock of the Company or
Desa International, Inc. and such person is or
becomes, directly or indirectly, the beneficial owner
of a greater percentage of the voting power of the
Voting Stock of the Company or Desa International,
Inc., calculated on a fully diluted basis, than the
percentage beneficially owned by the JWC Equity
Partners Holders, or
(B) after the IPO, would result in any
person (as defined above), other than the JWC Equity
Partners Holders, becoming the beneficial owner (as
defined above), directly or indirectly, of 35% or
more of the Voting Stock of the Company or Desa
International, Inc. and such person is or becomes,
directly or indirectly, the beneficial owner of a
greater percentage of the voting power of the Voting
Stock of the Company or Desa International, Inc.,
calculated on a fully-diluted basis, than the
percentage beneficially owned by the JWC Equity
Partners Holders.
(b) If (i) the Company (A) pays a dividend or makes a
distribution on any class of its Common Stock in shares of any class of
its Common Stock, or (B) subdivides its outstanding shares of any class
of Common Stock into a greater number of shares, or (C) combines its
outstanding shares of any class of Common Stock into a smaller number
of shares, or (D) issues by reclassification of any class of its Common
Stock any shares of its capital stock, or (ii) the Common Stock is
exchanged for or converted into any other securities pursuant to any
merger, consolidation, sale of all or substantially all of the
Company's assets or business, liquidation, dissolution or
reorganization, then Board of Directors of the Company (or its
successor) shall appropriately adjust the number of Subject Securities
set forth in Section 2.1(a)(i) hereof. Promptly after any such
adjustment, the Company (or its successor) shall give written notice
thereof to all of the Stockholders, which written notice shall set
forth the calculation of such adjustment in reasonable detail.
(c) The provisions of this Section 2.1 hereof shall not apply
to a Transfer which is a Permitted Transfer.
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2.2 Tagalong. Notwithstanding anything to the contrary contained in
Section 2.1 hereof, any Transfer of Subject Securities which would not be
permitted under Section 2.1 hereof may nonetheless be consummated if, but only
if, the JWC Equity Partners Holder proposing to make such transfer shall fully
comply with the terms and conditions set forth in this Sections 2.2, as
applicable.
(a) Any one or more JWC Equity Partners Holder (the
"Initiating Stockholder") desiring to Transfer such Subject Securities
shall give not less than 15 business days prior written notice of such
intended Transfer to each Preferred Holder and to the Company and the
JWC Representative; provided that, in the event that the proposed
Transfer includes an offer by the proposed transferee or its nominee to
purchase all of the Preferred Shares at their Liquidation Value, such
notice shall be given not less than 5 business days prior to such
intended Transfer. Such notice (the "Participation Notice") shall set
forth terms and conditions of such proposed Transfer, including the
name of the proposed transferee, the number of Subject Securities
proposed to be Transferred by the Initiating Stockholder and the type
of Transfer to be effectuated and shall include a copy of the agreement
pursuant to which such proposed Transfer is intended to be effected.
Within 10 days following the delivery of the Participation Notice by
the Initiating Stockholder, each Preferred Holder shall, by notice in
writing to the Initiating Stockholder and to the Company, have the
opportunity and right to sell to the proposed transferee in such
proposed Transfer (for a purchase price equal to the Liquidation Value
thereof, which purchase price shall be payable in cash or by bank,
cashier's or certified check or by bank wire transfer, but otherwise
upon the same terms and conditions as those received by the Initiating
Stockholder) any portion or all of the Preferred Shares at the time
owned by such Preferred Holder as such Preferred Holder shall specify
in such written notice to the Initiating Stockholder and the Company.
(b) Subject to the closing of such proposed Transfer in
respect of which a Participation Notice has been delivered, each
Preferred Holder so electing to sell Preferred Shares pursuant to
Section 2.2(a) hereof ("a "Participating Preferred Holder") shall
execute and deliver to the proposed transferee at such closing (i) such
agreements for the sale and purchase of such Preferred Shares and other
agreements, instruments and certificates as the Initiating Stockholder
shall execute and deliver in connection with such proposed Transfer
(provided that no Participating Preferred Holder shall be required in
connection with such proposed Transfer (A) to make any representations
or warranties other than representations and warranties as to (I) such
Participating Preferred Holder's ownership of his, her or its Preferred
Shares to be Transferred free and clear of all liens, claims, and
encumbrances, (II) such Participating Preferred Holder's power and
authority to effect such transfer without violation of any agreements,
instruments or laws, and (III) such matters pertaining to compliance
with securities laws as the transferee may reasonably require, or (B)
to agree to indemnify any Person with respect to any matter other than
such Participating Preferred Holder's own representations, warranties
and covenants) and (ii) certificates and/or other instruments
representing the Preferred Shares to be sold by such Participating
Preferred Holder, free
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and clear of all liens and encumbrances, together with stock or other
appropriate powers duly executed therefor, and shall receive in
exchange therefor at such closing the aggregate Liquidation Value
thereof, which shall be payable in cash or by bank, cashier's or
certified check or by bank wire transfer.
(c) If the prospective transferee does not purchase any of the
Preferred Shares of any Participating Preferred Holder required to be
included in such proposed Transfer pursuant to this Section 2.2
(otherwise than due to (i) the failure of such Participating Preferred
holder to comply with the provisions of Section 2.2(b) hereof or (ii)
any other fault of such Participating Preferred Holder), then the
Initiating Stockholder shall not Transfer any of its Subject Securities
in such proposed Transfer.
(d) The provisions of this Section 2.2 hereof shall not apply
to (i) any Permitted Transfer or (ii) any Transfer to which the
restrictions on Transfer set forth in Section 2.1 hereof do not apply.
2.3 Notice of Proposed Transfers. Not less than 3 business days prior
to any proposed Transfer of Subject Securities by any JWC Equity Partners
Holders (other than a Permitted Transfer or a Transfer in respect of which such
JWC Equity Partners Holders shall have given a Participation Notice), the JWC
Equity Partners Holders shall deliver to the Preferred Holders a notice
certifying whether the provisions of Section 2.2 hereof apply to such proposed
Transfer and setting forth the number of Subject Securities proposed to be
Transferred, the type of Transfer to be effectuated and calculations under
Sections 2.1(a)(i) and 2.1(a)(ii) hereof (including a report in substantially
the form of Exhibit B referred to in Section 2.4 below) giving pro forma effect
to such proposed Transfer.
2.4 Reports of Holdings of JWC Equity Partners Holders. A report
setting forth the number of Subject Securities beneficially owned by the JWC
Equity Partners Holders as of the date hereof is attached as Exhibit B to this
Agreement. On the first business day in March of each year following the date
hereof during the term of this Agreement, the JWC Equity Partners Holders will
deliver to the Preferred Holders a report, in substantially the form of such
Exhibit B, setting forth the number of Subject Securities beneficially owned by
the JWC Equity Partners Holders as of the end of the Company's immediately
preceding fiscal year.
ARTICLE III
Certain Other Provisions
3.1 Remedies.
(a) The parties to this Agreement acknowledge and agree that,
unless the aggregate amount of Proceeds (as defined in Section 3.1(b)
below) received by any JWC Equity Partners Holders in respect of a
Prohibited Transfer (as defined in Section 3.1(b) below) is equal to or
exceeds the aggregate Liquidation Value of all Preferred Shares held
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by Preferred Holders as of the date of such Prohibited Transfer (or the
date of the last of a series of related Transfers that constitute a
Prohibited Transfer hereunder), monetary damages would not be a
sufficient remedy for any breach of the covenants set forth in this
Agreement and that, therefore, the covenants of the JWC Equity Partners
Holders set forth in this Agreement may be enforced in equity by a
decree requiring specific performance. Without limiting the foregoing,
in the event of any such Prohibited Transfer, the parties to this
Agreement agree that an injunction may be issued in connection
therewith. Such remedies shall be cumulative and non-exclusive and
shall be in addition to any other rights and remedies the parties may
have under this Agreement or otherwise. The JWC Equity Partners Holders
shall not oppose any motion for injunctive relief on the grounds that
monetary damages are an adequate remedy for a breach of their covenants
set forth in this Agreement, and the JWC Equity Partners Holders hereby
waive any requirement for security or the posting of any bond or other
surety in connection with any temporary or permanent award of
injunctive, mandatory or other equitable relief.
(b) If any JWC Equity Partners Holders Transfers any Subject
Securities in one or more related Transfers occurring within six months
of one another to which Section 2.2 hereof applies without having
complied in all material respects with the provisions of Section 2.2
(a), (b) and (c) hereof (collectively, a "Prohibited Transfer"), then:
(i) in the event monetary damages are determined to
be an adequate remedy for such Prohibited Transfer hereunder,
each Preferred Holder shall be entitled, subject to the
following proviso and to Section 3.1(b)(ii) below, to recover
from such JWC Equity Partners Holder as damages for such
Prohibited Transfer an amount in cash equal to the Liquidation
Value of all of the Preferred Shares held by such Preferred
Holder as of the date of such Prohibited Transfer (or the date
of the last of a series of related Transfers that constitute a
Prohibited Transfer hereunder) (the "Total Damages");
provided, however, that in no event shall any Preferred Holder
be entitled to recover Total Damages in respect of a
Prohibited Transfer unless the aggregate cash proceeds, net of
reasonable out-of-pocket fees and expenses (including but not
limited to broker's fees and underwriters discounts and
commissions) actually received, from time to time prior to the
time of the payment of the Total Damages in respect of such
Prohibited Transfer, by such JWC Equity Partners Holder either
in such Prohibited Transfer or from sale(s) or other
disposition(s) of securities or other property (other than
cash) received by such JWC Equity Partners Holder in such
Prohibited Transfer (collectively, the "Proceeds") are equal
to or exceed the aggregate Liquidation Value of all Preferred
Shares held by Preferred Holders as of the date of such
Prohibited Transfer (or the date of the last of a series of
related Transfers that constitute a Prohibited Transfer
hereunder).
(ii) Such JWC Equity Partners Holder shall pay such
Total Damages in accordance with this Section 3.1(b) against
delivery of certificates and or other
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instruments representing, together with stock powers or other
appropriate instruments of assignment duly endorsed with
respect to, Preferred Shares having an aggregate Liquidation
Value as of the date of such Total Damages payment equal to
such Total Damages payment, free and clear of all claims,
liens and encumbrances.
(iii) The parties acknowledge and agree that the
remedy provided in this Section 3.1(b) is reasonable and does
not constitute a penalty.
3.2 Entire Agreement; Amendment; Termination.
(a) This Agreement sets forth the entire understanding of the
parties, and supersedes all prior agreements and all other arrangements
and communications, whether oral or written, with respect to the
subject matter hereof.
(b) The Schedule of Stockholders may be amended in a writing
signed by both the JWC Representative and the holders of a majority of
the Preferred Shares at the time held by the Preferred Holders to
reflect changes in the composition of the Stockholders and changes in
their addresses or telecopy numbers that may occur from time to time as
a result of Permitted Transfers or Transfers permitted under Article II
hereof. Amendments to the Schedule of Stockholders reflecting Permitted
Transfers or Transfers permitted under Article II hereof shall become
effective when the amended Schedule of Stockholders, and a copy of this
Agreement as executed by any new transferee or other new party hereto
in accordance with Section 3.11 hereof, are delivered to the
Stockholders.
(c) Any other amendment to this Agreement shall be in writing
and shall require the written consent of (i) either the JWC
Representative or the holders of a majority of the Subject Securities
at the time held by the JWC Equity Partners Holders and (ii) the
holders of at least 75% of the Preferred Shares at the time held by the
Preferred Holders.
(d) Without affecting any other provision of this Agreement
requiring termination of any rights or obligations of any Stockholder,
Permitted Transferee or any other transferee of Preferred Shares or
Subject Securities, the provisions of Article 2 of this Agreement shall
terminate as to such Stockholder, Permitted Transferee or other
transferee, when, pursuant to and in accordance with this Agreement,
such Stockholder, Permitted Transferee or other transferee, as the case
may be, no longer owns any Preferred Shares or Subject Securities.
(e) Notwithstanding the foregoing provisions of this Section
3.2, this Agreement may be terminated at any time upon the written
consent of (i) either the JWC Representative or the holders of a
majority of the Subject Securities at the time held by
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the JWC Equity Partners Holders and (ii) the holders of at least 75% of
the Preferred Shares at the time held by the Preferred Holders.
(f) Where provisions of this Agreement contemplate that
actions be taken or notices be given by a Stockholder Group, actions
taken or notices given by the holders of a majority of the Preferred
Shares or Subject Securities, as the case may be, held in the aggregate
by such Stockholder Group shall be deemed to be actions taken or
notices given by such Stockholder Group, and the other parties hereto
are and will be entitled to rely on any action so taken or any notice
so given by such majority holders of a Stockholder Group.
3.3 Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
3.4 Notices. All notices, consents and other communications required,
or contemplated under this Agreement shall be in writing and shall be delivered
in the manner specified herein or, in the absence of such specification, shall
be deemed to have been duly given (i) three Business Days after mailing by first
class certified mail, postage prepaid, (ii) when delivered by hand, (iii) upon
confirmation of receipt by telecopy, or (iv) one day after sending by overnight
delivery service, to the respective addresses of the parties set forth below:
(a) For notices and communications to the Company, to it at:
Desa Holdings Corporation
2701 Industrial Drive
Bowling Green, KY 42102
Attention: President
Telecopy: 502-781-5705
(b) For notices and communications to the JWC Equity Partners
Holders, to their respective addresses set forth in the Schedule of
Stockholders, with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Christopher Cabot, Esq.
Telecopy: 617-338-2880
(c) For notices and communications to the Preferred Holders,
to their respective addresses set forth in the Schedule of
Stockholders, with a copy to:
Kirkland & Ellis
200 East Randolph Drive
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Chicago, IL 60601
Attention: Richard Porter, Esq.
Telecopy: 312-861-2200
By notice complying with the foregoing provisions of this Section 3.4, each
party shall have the right to change the mailing address for future notices and
communications to such party.
3.5 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and to their respective permitted
transferees, successors, assigns, heirs and administrators; provided, that the
rights of any Preferred Holder under this Agreement may not be assigned except
to a Permitted Transferee of such Preferred Holder in connection with a
Permitted Transfer effected pursuant to clause (h) or (i) of the definition of
"Permitted Transfer" herein.
3.6 Recapitalizations, Exchanges, etc. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to any and all
shares of capital stock, debt securities or other securities of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise) which may be issued in respect of, in exchange for, or
in substitution of the any of the Preferred Shares or Subject Securities by
reason of a stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any such events, amounts hereunder shall be
appropriately adjusted by the Board of Directors of the Company. Promptly after
any such adjustment, the Company shall give written notice thereof to all of the
Stockholders.
3.7 JWC Representative. Each JWC Equity Partners Holder hereby
designates and appoints (and each Permitted Transferee of each such JWC Equity
Partners Holder shall be deemed to have so designated and appointed) each of
John W. Childs and Adam L. Suttin, acting singly and with full power of
substitution (the "JWC Representative"), the representative of each such Person
to perform all such acts as are required, authorized or contemplated by this
Agreement to be performed by any such Person and hereby acknowledges that the
JWC Representative shall be the only Person authorized to take any action so
required, authorized or contemplated by this Agreement by each such Person. Each
such Person further acknowledges that the foregoing appointment and designation
shall be deemed to be coupled with an interest and shall survive the death or
incapacity of such Person. Each such Person hereby authorizes (and each
Permitted Transferee shall be deemed to have authorized) the other parties
hereto to disregard any notice or other action taken by such Person pursuant to
this Agreement except for the JWC Representative. The other parties hereto are
and will be entitled to rely on any action so taken or any notice given by the
JWC Representative and are and will be entitled and authorized to give notices
only to the JWC Representative for any notice contemplated by this Agreement to
be given to any such Person. A successor to the JWC Representative may be chosen
by the holders of a majority of the Preferred Shares at the time held by the JWC
Equity Partners Holders, provided that written notice thereof is given by the
successor JWC Representative to the Preferred Holders and the other JWC Equity
Partners Holders.
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3.8 Action Necessary to Effectuate the Agreement. The parties hereto
agree to take or cause to be taken all such corporate and other action as may be
necessary to effect the intent and purposes of this Agreement.
3.9 Legend on Certificate. All the certificates or other instruments
representing any Preferred Shares held by any Preferred Holder or Subject
Securities held by any JWC Equity Partners Holder which are now or hereafter
held by such Stockholder shall be subject to the terms of this Agreement and
shall have endorsed in writing, stamped or printed, thereon the following
legend:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A PREFERRED STOCK TAGALONG AGREEMENT DATED
AS OF OCTOBER 9, 1998, AS AMENDED FROM TIME TO TIME, A COPY OF
WHICH IS ON FILE WITH AND AVAILABLE FROM THE SECRETARY OF THE
COMPANY UPON WRITTEN REQUEST."
3.10 Effectiveness of Transfers. Subject to Section 3.5 hereof, any
Person acquiring any Preferred Shares or Subject Securities pursuant to a
Permitted Transfer shall hold such securities pursuant to this Agreement and
such transferee shall, except as otherwise expressly stated herein, have all the
rights and be subject to all of the obligations of a Stockholder under this
Agreement automatically and without requiring any further act by such transferee
or by any parties to this Agreement. Without affecting the preceding sentence,
if such transferee is not a Stockholder on the dates of such Transfer, then such
transferee, as a condition to such Transfer, shall confirm such transferee's
obligations hereunder in accordance with Section 3.11 hereof. Each party hereto
acknowledges and agrees that no Preferred Shares or Subject Securities shall be
transferred on the Company's books and records, and no Transfer of thereof shall
be otherwise effective, unless any such Transfer is made in accordance with the
terms and conditions of this Agreement, and hereby authorizes the Company to
enter appropriate stop transfer notations on its transfer records to give effect
to this Agreement.
3.11 Additional Stockholders. Any Person acquiring any Preferred Shares
or Subject Securities pursuant to a Permitted Transfer shall, on or before the
Transfer or issuance to it of such Preferred Shares or Subject Securities, sign
and deliver to the Company a counterpart signature page hereto in form
reasonably satisfactory to the Company, the JWC Representative and the holders
of a majority of the Preferred Shares at the time held by the Preferred Holders
and shall thereby become a party to this Agreement; provided that a transferee
which is a Permitted Transferee under clause (f)(i) of the definition of
Permitted Transfer shall not be obligated so to agree until foreclosure on its
pledge.
3.12 No Waiver. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy conferred by this
Agreement shall operate as waiver thereof or otherwise prejudice such party's
rights, powers and remedies. No single or partial
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exercise of any rights, powers or remedies conferred by this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
3.13 Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument, and all signatures need not appear
on any one counterpart.
3.14 Headings, etc. All headings and captions in this Agreement are for
purposes of references only and shall not be construed to limit or affect the
substance of this Agreement. Words used in this Agreement, regardless of the
gender and number used, will be deemed and construed to include any other
gender, masculine, feminine, or neuter, and any other number, singular or
plural, as the context requires. As used in this Agreement, the word "including"
is not limiting, and the word "or" is not exclusive. The words "this Agreement",
"hereto", "herein", "hereunder", "hereof", and words or phrases of similar
import refer to this Agreement as a whole, together with any and all Schedules
and Exhibits hereto, and not to any particular article, section, subsection,
paragraph, clause or other portion of this Agreement.
3.15 Governing Law. This Agreement shall be construed under and
governed by the substantive and procedural laws of the State of Delaware
applicable to a contract executed in and wholly performed therein.
[Signatures on Following Pages]
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DESA HOLDINGS CORPORATION
Preferred Stock Tagalong Agreement
Counterpart Signature Page
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first set forth above.
THE COMPANY:
DESA HOLDINGS CORPORATION
By:/s/____________________________
Name:
Title:
THE JWC EQUITY PARTNERS HOLDERS:
J.W. CHILDS EQUITY PARTNERS, L.P.
By: J.W. Childs Advisors, L.P.,
its General Partner
By: J.W. Childs Associates, L.P.,
its General Partner
By: J.W. Childs Associates, Inc.,
its General Partner
By:/s/____________________________
Title:
JWC EQUITY FUNDING, INC.
By:/s/____________________________
Title:
DESA HOLDINGS CORPORATION
Preferred Stock Tagalong Agreement
Counterpart Signature Page
THE PREFERRED HOLDERS:
JACKSON NATIONAL LIFE
INSURANCE COMPANY
By: PPM America, Inc., as attorney in fact,
on behalf of Jackson National Life
Insurance Company
By:/s/______________________________
Title:
OLD HICKORY FUND I, LLC
By: PPM America, Inc., its manager
By:/s/______________________________
Title:
RELIASTAR FINANCIAL CORP.
By/s/:______________________________
Title:
Exhibit A
Schedule of Stockholders
As of October 9, 1998
[Schedule of stockholders has not been
included and is available upon request]
Exhibit B
Holdings of JWC Equity Partners Holders
As of October 9, 1998
[Exhibit has not been
included and is available upon request]