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 ”).
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:
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 1934 (the “ Exchange Act ”);
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.
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SECTION 2
BOARD OF DIRECTORS
(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
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entitled to
take all necessary and appropriate action to cause such Purchaser
Designee to be removed.
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