Exhibit
10.5


 


Execution
Copy


 


MANAGEMENT
STOCKHOLDER’S AGREEMENT


(Name of Executive)


 


This Management Stockholder’s Agreement (this
“Agreement”) is entered into as of June 30, 2005 (the “Effective Date”)
between Masonite Holding Corporation, a Canadian corporation (the “Company”),
and the undersigned person (the “Management Stockholder”) (the Company
and the Management Stockholder being hereinafter collectively referred to as
the “Parties”). All capitalized terms not immediately defined are
hereinafter defined in Section 7(b) of this Agreement.


 


WHEREAS, pursuant to the Combination
Agreement, dated as of December 22, 2004, as amended (the “Combination
Agreement”), between Masonite International Corporation (“Masonite”)
and Stile Acquisition Corp., a corporation affiliated with KKR Millennium Fund
(Overseas), Limited Partnership, an Alberta limited partnership (“Millennium”)
and KKR Partners (International) Limited Partnership, an Alberta limited
partnership (together with Millennium, the “Investors”), the Investors,
together with certain Other Management Stockholders (as defined below), own all
of the Company’s common shares (the “Common Stock”);


 


WHEREAS, the
Management Stockholder has been selected by the Company to purchase shares of
Common Stock and, in connection therewith, will receive options to purchase
shares of Common Stock (together with any options to purchase shares of Common
Stock granted to the Management Stockholder after the Effective Date, the “Options”)
pursuant to the terms set forth below and the terms of the 2005 Stock Purchase
and Option Plan for Key Employees of Stile Holding Corp. and Its Subsidiaries
(the “Option Plan”) and the Stock Option Agreement dated as of the date
hereof, entered into by and between the Company and the Management Stockholder
(the “Stock Option Agreement”); and


 


WHEREAS, this Agreement is one of several
other agreements (“Other Management Stockholders’ Agreements”) which
have been, or which in the future will be, entered into between the Company and
other individuals who are or will be key employees of the Company or one of its
subsidiaries (collectively, the “Other Management Stockholders”).


 


NOW THEREFORE, to implement the foregoing and
in consideration of the grant of Options and of the mutual agreements contained
herein, the Parties agree as follows:


 


1.             Issuance
of Options; Purchased Stock; Purchases of Additional Common Stock


 


(a)  The Management Stockholder
hereby subscribes for and shall purchase, as of the Effective Date, and the
Company shall issue and deliver to the Management Stockholder as of the
Effective Date, [ ] shares of Common Stock, at a per share purchase price of
$5.00 (the “Base Price”), which price is equal to the effective per
share purchase price paid by the Investors for the shares of the Company (all
such shares acquired by the Management Stockholder, the “Purchased Stock”).
The aggregate purchase price for all shares of the Purchased Stock is $[ ].


 


(b)  Subject to the terms and
conditions hereinafter set forth and as set forth in the Option Plan, as of the
Effective Date, the Company is issuing to the Management


 

















 


Stockholder an
Option to acquire shares of Common Stock at an initial exercise price per share
equal to the Base Price and the Parties shall execute and deliver to each other
copies of the Stock Option Agreement concurrently with the issuance of the
Option.


 


(c)  The
Company shall have no obligation to issue any Purchased Stock or issue any
Options to any person who (i) is a resident or citizen of a province, state or
other jurisdiction in which the sale of the Common Stock to him or her would
constitute a violation of the securities or “blue sky” laws of such
jurisdiction or (ii) is not an employee of the Company or any of its
subsidiaries on the date hereof.


 


2.             Management
Stockholder’s Representations, Warranties and Agreements.


 


(a)  In addition to agreeing to and
acknowledging the restrictions on transfer of the Stock (as defined in Section
3) set forth in Sections 3 and 4, if the Management Stockholder is a Rule 405
Affiliate, the Management Stockholder also agrees and acknowledges that he will
not transfer any shares of the Stock unless:


 


(i)  the transfer is pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
and the rules and regulations in effect thereunder (the “Act”), and in
compliance with applicable provisions of state securities laws; or


 


(ii)  (A) counsel for the
Management Stockholder (which counsel shall be reasonably acceptable to the
Company) shall have furnished the Company with an opinion, reasonably
satisfactory in form and substance to the Company, that no such registration is
required because of the availability of an exemption from registration under
the Act and (B) if the Management Stockholder is a citizen or resident of
any country other than the United States, or the Management Stockholder desires
to effect any transfer in any such country, counsel for the Management
Stockholder (which counsel shall be reasonably satisfactory to the Company)
shall have furnished the Company with an opinion or other advice reasonably
satisfactory in form and substance to the Company to the effect that such
transfer will comply with the securities laws of such jurisdiction.


 


Notwithstanding
the foregoing, the Company acknowledges and agrees that any of the following
transfers are deemed to be in compliance with the Act and this Agreement
(including without limitation any restrictions or prohibitions herein) and no
opinion of counsel is required in connection therewith: (x) a transfer permitted
by or made pursuant to Section 3, 4, 5, 6 or 9 hereof, (y) a transfer
upon the death or Permanent Disability of the Management Stockholder to the
Management Stockholder’s Estate or a transfer to the executors, administrators,
testamentary trustees, legatees or beneficiaries of a person who has become a
holder of Stock in accordance with the terms of this Agreement; provided
that it is expressly understood that any such transferee shall be bound by the
provisions of this Agreement, and (z) a transfer made after the Effective
Date in compliance with applicable Canadian and United States securities laws
to a Management Stockholder’s Trust, provided that such transfer is made
expressly subject to this Agreement and that the transferee agrees in writing
to be bound by the terms and conditions hereof.


 


(b)  From and after the Effective
Date until such time as the transfer restrictions set forth in Sections 3 and 4
no longer apply to such Stock and the Company has


 

















 


reissued a
certificate representing such Stock, the certificate (or certificates)
representing the Stock shall bear the following legends:


 


“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES
WITH THE PROVISIONS OF THE MANAGEMENT STOCKHOLDER’S AGREEMENT DATED AS OF JUNE
30, 2005 BETWEEN MASONITE HOLDING CORPORATION (THE “COMPANY”) AND THE
MANAGEMENT STOCKHOLDER NAMED ON THE FACE HEREOF (A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY).”


 


(c)  The Management Stockholder
acknowledges that he has been advised that (i) a restrictive legend in the
form heretofore set forth shall be placed on the certificates representing the
Stock and (ii) a notation shall be made in the appropriate records of the
Company indicating that the Stock is subject to restrictions on transfer and
appropriate stop transfer restrictions will be issued to the Company’s transfer
agent with respect to the Stock. The Management Stockholder acknowledges that
the Stock may be subject to restricted periods or seasoning periods under
applicable securities legislation, regulations and rules of each of the
provinces and territories in Canada and the blanket rulings, orders, policy
statements and written interpretations issued by the regulatory authorities
administering such legislation (collectively, “Canadian Securities Laws”)
and that he must not transfer, sell or otherwise trade the Stock unless
permitted under Canadian Securities Laws. If the Management Stockholder is a
Rule 405 Affiliate, the Management Stockholder also acknowledges that
(1) the Stock must be held indefinitely and the Management Stockholder
must continue to bear the economic risk of the investment in the Stock unless
it is subsequently registered under the Act or an exemption from such
registration is available, (2) when and if shares of the Stock may be
disposed of without registration in reliance on Rule 144 of the rules and
regulations promulgated under the Act, such disposition can be made only in
limited amounts in accordance with the terms and conditions of such rule and
(3) if the Rule 144 exemption is not available, public sale without
registration will require compliance with some other exemption under the Act.


 


(d)  If any shares of the Stock are
to be disposed of in accordance with an applicable resale exemption or
otherwise, the Management Stockholder shall promptly notify the Company of such
intended disposition and shall deliver to the Company at, or prior to, the time
of such disposition such documentation as the Company may reasonably request in
connection with such sale and, in the case of a disposition pursuant to
Rule 144, shall deliver to the Company an executed copy of any notice on
Form 144 required to be filed with the SEC.


 


(e)  The Management Stockholder
agrees that, if any shares of the Stock are offered to the public pursuant to a
(final) prospectus under Canadian Securities Laws or pursuant to an effective
registration statement under the Act (other than registration of securities
issued on Form S-8, S-4 or any successor or similar form), the Management
Stockholder will not effect any public sale or distribution of any shares of
the Stock (except pursuant to such prospectus or registration statement) for
the “Lock-Up Period,” unless otherwise agreed to in writing by the Company. The
“Lock-Up Period” is the period (i) beginning on the date of the receipt of a
notice from the Company that the Company has


 

















 


filed, or imminently
intends to file, such prospectus or registration statement and (ii) ending
180 days (or such shorter period as may be consented to by the managing
underwriter or underwriters) in the case of the initial Public Offering and 90
days (or such shorter period as may be consented to by the managing underwriter
or underwriters, if any) in the case of any other Public Offering after the
issuance of a receipt by the Canadian securities regulatory authorities for
such prospectus or the effective date of such registration statement.


 


(f)  The Management Stockholder
represents and warrants that (i) with respect to the Stock, he has
received and reviewed the available information relating to the Stock,
including having received and reviewed the documents related thereto, certain
of which documents set forth the rights, preferences and restrictions relating
to the Options and the Stock underlying the Options and (ii) he has been
given the opportunity to obtain any additional information or documents and to
ask questions and receive answers about such information, the Company and the
business and prospects of the Company which he deems necessary to evaluate the
merits and risks related to his investment in the Stock and to verify the
information contained in the information received as indicated in this
Section 2(f), and he has relied solely on such information.


 


(g)  The Management Stockholder
further represents and warrants that (i) his financial condition is such
that he can afford to bear the economic risk of holding the Stock for an
indefinite period of time and has adequate means for providing for his current
needs and personal contingencies, (ii) he can afford to suffer a complete
loss of his investment in the Stock, (iii) he understands and has taken
cognizance of all risk factors related to the purchase of the Stock,
(iv) his knowledge and experience in financial and business matters are
such that he is capable of evaluating the merits and risks of his purchase of
the Stock as contemplated by this Agreement, and (v) his participation in the
purchase of the Purchased Stock is voluntary.


 


3.             Transferability
of Stock. The Management Stockholder agrees that he will not directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (any of the foregoing acts being referred to herein as a “transfer”)
any shares of Purchased Stock, at the time of exercise, the Common Stock
issuable upon exercise of the Options (“Option Stock”), Net Settled Stock and
any other Common Stock otherwise acquired and/or held by the Management
Stockholder Entities (collectively referred to as “Stock”) at any time during
the period commencing on the Effective Date and ending on the fifth anniversary
of the Effective Date; provided, however, that the Management
Stockholder may transfer shares of Stock during such time pursuant to one of
the following exceptions: (a) transfers permitted by Section 4, 5 or
6; (b) transfers permitted by clauses (y) and (z) of
Section 2(a); (c) a sale of shares of Common Stock pursuant to a
(final) prospectus under Canadian Securities Legislation or pursuant to an
effective registration statement under the Act filed by the Company, including
without limitation pursuant to Section 9 (excluding any registration on
Form S-8, S-4 or any successor or similar form); (d) transfers of Stock that
the Management Stockholder would have been entitled to include in a Request
pursuant to Section 9 (after any cutbacks) but elected not to include in such
Request; (e) transfers permitted pursuant to the Sale Participation
Agreement (as defined in Section 7); or (f) other transfers permitted
by the Board. No transfer of any such shares in violation hereof shall be made
or recorded on the books of the Company and any such transfer shall be void ab
initio and of no effect.


 

















 


4.             Right
of First Refusal; Right of First Offer.


 


(a)  If, at any time after the
fifth anniversary of the Effective Date and prior to the date of consummation
of an initial Public Offering, the Management Stockholder receives a bona fide
offer to purchase any or all of his Stock (the “Third Party Offer”) from
a third party (which, for the avoidance of doubt, shall not include any
transfers pursuant to clauses (y) and (z) of Section 2(a)) (the “Offeror”),
which the Management Stockholder wishes to accept, the Management Stockholder
shall cause the Third Party Offer to be reduced to writing and shall notify the
Company in writing of his wish to accept the Third Party Offer. The Management
Stockholder’s notice to the Company shall contain an irrevocable offer to sell
such Stock to the Company (in the manner set forth below) at a purchase price
equal to the price contained in, and on the same terms and conditions of, the
Third Party Offer, and shall be accompanied by a copy of the Third Party Offer
(which shall identify the Offeror). At any time within fifteen (15) days
after the date of the receipt by the Company of the Management Stockholder’s
notice, the Company shall have the right and option to purchase, or to arrange
for a third party to purchase, all (but not less than all) of the shares of
Stock covered by the Third Party Offer, pursuant to Section 4(b).


 


(b)  The Company shall have the
right and option to purchase, or to arrange for a third party to purchase, all
of the shares of Stock covered by the Third Party Offer at the same price and
on substantially the same terms and conditions as the Third Party Offer (or, if
the Third Party Offer includes any consideration other than cash, then at the
sole option of the Company, at the equivalent all cash price, determined in
good faith by the Company’s Board after consultation with a third party
investment banker), by delivering a certified bank check or checks in the
appropriate amount (or by wire transfer of immediately available funds, if the
Management Stockholder Entities provide to the Company wire transfer
instructions) (and any such non-cash consideration to be paid) to the
Management Stockholder at the principal office of the Company against delivery
of certificates or other instruments representing the shares of Stock so
purchased, appropriately endorsed by the Management Stockholder. If at the end
of the 15-day period, the Company has not tendered the purchase price for such
shares in the manner set forth above, the Management Stockholder may, during
the succeeding 60-day period, sell not less than all of the shares of Stock
covered by the Third Party Offer to the Offeror on terms no less favorable to
the Management Stockholder than those contained in the Third Party Offer. Promptly
after such sale, the Management Stockholder shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion and time
of completion of such sale and of the terms thereof as may reasonably be
requested by the Company. If, at the end of sixty (60) days following the
expiration of the 15-day period during which the Company is entitled hereunder
to purchase the Stock, the Management Stockholder has not completed the sale of
such shares of the Stock as aforesaid, all of the restrictions on sale,
transfer or assignment contained in this Agreement shall again be in effect
with respect to such shares of the Stock.


 


(c)  At any time after both (i) the
fifth anniversary of the Effective Date and (ii) the date of consummation of an
initial Public Offering, but prior to the date of consummation of a Qualified
Public Offering, the Management Stockholder proposes to sell any or all of his
Stock (a “Proposed Sale”) to a third party (which, for the avoidance of
doubt, shall not include any transfers pursuant to clauses (y) and (z) of
Section 2(a)), the Management Stockholder shall first notify the Company
in writing. The Management Stockholder’s notice to the Company (the “Proposed
Sale Notice”) shall (i) state the Management Stockholder’s intention to
sell Stock to one or more persons, the amount of Stock to be sold, the purchase
price therefor, and a summary of the other material terms of the Proposed Sale
and (ii) contain an irrevocable offer to sell such Stock to the Company (in


 

















 


the manner set forth
below) at a purchase price equal to the price contained in, and on
substantially the same terms and conditions of, the Proposed Sale. At any time
within one business day after the date of the receipt by the Company of the
Proposed Sale Notice, the Company shall have the right and option to purchase,
or to arrange for a third party to purchase, all (but not less than all) of the
shares of Stock covered by the Proposed Sale Notice, pursuant to Section 4(d).


 


(d)  The Company shall have the
right and option to purchase, or to arrange for a third party to purchase, all
of the shares of Stock covered by the Proposed Sale Notice at the same price
and on substantially the same terms and conditions of the Proposed Sale Notice
(or, if the Proposed Sale includes any consideration other than cash, then at
the sole option of the Company, at the equivalent all cash price, determined in
good faith by the Company’s Board after consultation with a third party
investment banker), by delivering a certified bank check or checks in the
appropriate amount (or by wire transfer of immediately available funds, if the
Management Stockholder Entities provide to the Company wire transfer
instructions) (and any such non-cash consideration to be paid) to the Management
Stockholder at the principal office of the Company against delivery of
certificates or other instruments representing the shares of Stock so
purchased, appropriately endorsed by the Management Stockholder. If at the end
of the one business day period, the Company has not tendered the purchase price
for such shares in the manner set forth above, the Management Stockholder may,
during the succeeding 10-day period, sell not less than all of the shares of
Stock covered by the Proposed Sale, to a third party on terms no less favorable
to the Management Stockholder than those contained in the Proposed Sale Notice.
Promptly after such sale, the Management Stockholder shall notify the Company
of the consummation thereof and shall furnish such evidence of the completion
and time of completion of such sale and of the terms thereof as may reasonably
be requested by the Company. If, at the end of ten (10) days following the
expiration of the one business day period during which the Company is entitled
hereunder to purchase the Stock, the Management Stockholder has not completed
the sale of such shares of the Stock as aforesaid, all of the restrictions on
sale, transfer or assignment contained in this Agreement shall again be in
effect with respect to such shares of the Stock.


 


(e)  Notwithstanding
anything in this Agreement to the contrary, this Section 4 shall terminate and
be of no further force or effect upon the occurrence of a Change in Control.


 


5.                                       The Management Stockholder’s
Right to Resell Stock and Options to the Company.


 


(a)  Except as otherwise provided
herein and for the purpose of providing a market for the Common Stock or
Options for the applicable Management Stockholder Entities, if, prior to the
later of the fifth anniversary of the Effective Date and a Qualified Public
Offering, the Management Stockholder is still in the employ of the Company
(and/or, if applicable, its subsidiaries) and the Management Stockholder’s
employment is terminated as a result of the death or Permanent Disability of
the Management Stockholder, then the applicable Management Stockholder Entity,
shall, for one year (the “Put Period”) following the date of such
termination for death or Permanent Disability, have the right to:


 


(i)  With respect to the Stock,
sell to the Company, and the Company shall be required to purchase, on one
occasion, all of the shares of Stock then held by the applicable Management
Stockholder Entities at a per share price equal to the Fair


 





















 


Market Value Per Share on the applicable
repurchase date (the “Section 5 Repurchase Price”).


 


(ii)  With
respect to the Options, receive from the Company, on one occasion, in exchange
for all of the exercisable Options then held by the applicable Management
Stockholder Entities, if any, a number of shares of Stock equal to the quotient
of (x) the product of (A) the excess, if any, of the Section 5 Repurchase Price
over the Option Exercise Price and (B) the number of Exercisable Option Shares,
divided  by (y) the Section 5 Repurchase Price, which Options
shall be terminated in exchange for such payment (the “Net Settled Stock”).
In the event the foregoing Option Excess Price is zero or a negative number,
all outstanding exercisable Options shall be automatically terminated without
any payment in respect thereof. In the event that the Management Stockholder
Entities do not exercise the foregoing rights, all exercisable but unexercised
Options shall terminate pursuant to the terms of the Stock Option Agreement. All
unexercisable Options held by the applicable Management Stockholder Entities
shall terminate without payment immediately upon termination of employment.


 


(b)  For 30 days following the date
that is six months after the receipt by the applicable Management Stockholder
Entities of the Net Settled Stock (the “Settled Stock Put Period”)
(which period may, for the avoidance of doubt, extend after the expiration of
the Put Period), sell to the Company, and the Company shall be required to
purchase, on one occasion, all such Net Settled Stock held by the applicable
Management Stockholder Entities, at a per share price equal to the Section 5
Repurchase Price.


 


(c)  In the event the applicable
Management Stockholder Entities intend to exercise their rights pursuant to
Section 5(a), such Management Stockholder Entities shall send written
notice to the Company, (i) at any time during the Put Period, of their
intention to sell shares of Stock in exchange for the payment referred to in
Section 5(a)(i) and/or to exchange such Options for Net Settled Stock or
(ii) at any time during the Settled Stock Put Period, of their intention to
sell the Net Settled Stock in exchange for the payment referred to in Section
5(a)(iii)(the “Redemption Notice”). The completion of the purchases or
exchanges shall take place at the principal office of the Company on the tenth
business day after the giving of the Redemption Notice. The Section 5
Repurchase Price shall be paid by delivery to the applicable Management
Stockholder Entities of a certified bank check or checks in the appropriate
amount payable to the order of each of the applicable Management Stockholder
Entities (or by wire transfer of immediately available funds, if the Management
Stockholder Entities provide to the Company wire transfer instructions) and the
Net Settled Stock shall be delivered to the applicable Management Stockholder
Entities, both against delivery of certificates or other instruments
representing the Stock so purchased and appropriate documents canceling the
Options so terminated appropriately endorsed or executed by the applicable
Management Stockholder Entities or any duly authorized representative.


 


(d)  Notwithstanding anything in
Section 5(a) to the contrary and subject to Section 10(a), if there
exists and is continuing a default or an event of default on the part of the
Company or any subsidiary of the Company under any loan, guarantee or other
agreement under which the Company or any subsidiary of the Company has borrowed
money or if the repurchase by the Company referred to in Section 5(a)
would result in a default or an event of default on the part of the Company or
any subsidiary of the Company under any such agreement or if a repurchase would
not be permitted under Section 30(2) of the Canada Business Corporations Act or
would otherwise violate the Canada Business Corporations Act


 





















 


(or if the Company
reincorporates in another jurisdiction, any applicable statutes of such
jurisdiction) (each such occurrence being an “Event”), the Company shall
not be obligated to repurchase any of the Stock from the applicable Management
Stockholder Entities until the first business day which is ten (10)
calendar days after all of the foregoing Events have ceased to exist (the “Repurchase
Eligibility Date”); provided, however, that (i) the
number of shares of Stock subject to repurchase under this Section 5(d)
shall be that number of shares of Stock as specified in the Redemption Notice
and held by the applicable Management Stockholder Entities at the time of
delivery of the Redemption Notice in accordance with Section 5(c) hereof. Notwithstanding
the foregoing and subject to Section 6(e), if an Event exists and is
continuing for ninety (90) days, the Management Stockholder Entities shall
be permitted by written notice to rescind any Redemption Notice.


 


6.                                       The Company’s Option to Purchase
Stock and Options of Management Stockholder Upon Certain Terminations of
Employment.


 


(a)  Termination for Cause by the Company. Except as otherwise
provided herein, if, prior to the fifth anniversary of the Effective Date,
(i) the Management Stockholder’s active employment with the Company
(and/or, if applicable, its subsidiaries) is terminated by the Company (and/or,
if applicable, its subsidiaries) for Cause, (ii) the beneficiaries of a
Management Stockholder’s Trust shall include any person or entity other than
the Management Stockholder, his spouse (or ex-spouse) or his lineal descendants
(including adopted children) or (iii) the Management Stockholder shall
otherwise effect a transfer of any of the Stock other than as permitted in this
Agreement (other than as may be required by applicable law or an order of a
court having competent jurisdiction) after notice from the Company of such
impermissible transfer and a reasonable opportunity to cure such transfer
(each, a “Section 6(a) Call Event”):


 


(A)          With respect to the Stock, for the
purpose of providing a market for the Stock for the applicable Management
Stockholder Entities, the Company may purchase all or any portion of the shares
of the Stock then held by the applicable Management Stockholder Entities at a
per share purchase price equal to the lesser of (x) the Fair Market Value
Per Share and (y) the Book Value Per Share (any such applicable repurchase
price, the “Section 6(a) Repurchase Price”); and


 


(B)           With respect to the Options, all such
Options (whether or not then exercisable) held by the applicable Management
Stockholder Entities will terminate immediately without payment in respect
thereof.


 


(b)  Termination by the Management Stockholder without Good Reason.
Except as otherwise provided herein, if, prior to the fifth anniversary of the
Effective Date, the Management Stockholder’s active employment with the Company
(and/or, if applicable, its subsidiaries) is terminated by the Management
Stockholder without Good Reason (a “Section 6(b) Call Event”):


 


(A)          With respect to the Stock, for the
purpose of providing a market for the Stock for the applicable Management
Stockholder Entities, the Company may purchase all or any portion of the shares
of the Stock then held by the applicable Management Stockholder Entities at a
per share purchase price equal to (x) the lesser of (i) the Fair Market Value
Per Share and (ii) the Book Value Per Share, if the Section 6(b) Call Event is
prior to a Change in Control or (y) the Fair Market Value Per Share, if the
Section 6(b) Call Event is following a Change in Control; and


 

















 


(B)           With respect to the Options, the
Company may purchase all or any portion of the exercisable Options held by the
applicable Management Stockholder Entities for an amount equal to the product
of (x) the excess, if any, of (i) the lesser of (1) the Fair Market Value Per
Share and (2) the Book Value Per Share if the Section 6(b) Call Event is prior
to a Change in Control or (ii) the Fair Market Value Per Share, if the Section
6(b) Call Event is following a Change in Control, over the Option Exercise
Price and (y) the number of Exercisable Option Shares, which Options shall be
terminated in exchange for such payment. In the event the foregoing Option
Excess Price is zero or a negative number, all outstanding exercisable Options
granted to the Management Stockholder under the Option Plan shall be
automatically terminated without any payment in respect thereof. In the event
that the Company does not exercise the foregoing rights, all exercisable but
unexercised Options shall terminate pursuant to the terms of
Section 3.2(d) of the Stock Option Agreement. All unexercisable Options
held by the applicable Management Stockholder Entities shall terminate, without
payment, immediately upon termination of employment or on such later date as
may otherwise provided in the Stock Option Agreement.


 


(c)  Termination for Death or Disability or without Cause by the Company or
Termination by the Management Stockholder with Good Reason. Except
as otherwise provided herein, if, prior to the fifth anniversary of the
Effective Date, the Management Stockholder’s employment with the Company
(and/or, if applicable, its subsidiaries) is terminated (i) as a result of the
death or Permanent Disability of the Management Stockholder or without Cause by
the Company or (ii) by the Management Stockholder with Good Reason (each a “Section 6(c)
Call Event”):


 


(A)          With respect to the Stock, for the
purpose of providing a market for the Stock for the applicable Management
Stockholder Entities, the Company may purchase all or any portion of the shares
of the Stock then held by the applicable Management Stockholder Entities at a
per share price equal to the Fair Market Value Per Share on the applicable
repurchase date; and


 


(B)           With respect to the Options, the
Company may purchase all or any portion of the exercisable Options held by the
applicable Management Stockholder Entities for an amount equal to the product
of (x) the excess, if any, of the Fair Market Value Per Share over the Option
Exercise Price and (y) the number of Exercisable Option Shares, which
Options shall be terminated in exchange for such payment. In the event the
foregoing Option Excess Price is zero or a negative number, all outstanding
exercisable Options granted to the Management Stockholder under the Option Plan
shall be automatically terminated without any payment in respect thereof. In
the event that the Company does not exercise the foregoing rights, all
exercisable but unexercised Options shall terminate pursuant to the terms of
the Stock Option Agreement. All unexercisable Options held by the applicable
Management Stockholder Entities shall terminate, without payment, immediately
upon termination of employment or on such later date as may otherwise provided
in the Stock Option Agreement.


 


(d)  Call Notice. The Company shall have a period (the “Call
Period”) of sixty (60) days from the later of (i) sixty (60)
days from the date of any Call Event (or, if later, with respect to a
Section 6(a) Call Event, the date after discovery of, and the applicable
cure period for, an impermissible transfer constituting a Section 6(a)
Call Event) and (ii) thirty (30) days from the date the Management
Stockholder rescinds a Redemption Notice pursuant to the last sentence of Section 5(c),
in which to give notice in writing to the Management Stockholder of its
election to exercise its rights and obligations pursuant to this


 

















 


Section 6 (“Call
Notice”). Notwithstanding the foregoing, with respect to Net Settled Stock,
the Company shall have a period of sixty (60) days following the five month
anniversary of the receipt by the Management Stockholder Entities of the Net
Settled Stock to give the Call Notice. The completion of the purchases pursuant
to the foregoing shall take place at the principal office of the Company on the
tenth business day after the giving of the Call Notice. The applicable
Repurchase Price (including any payment with respect to the Options as
described in this Section 6) shall be paid by delivery to the applicable
Management Stockholder Entities of a certified bank check or checks in the
appropriate amount payable to the order of each of the applicable Management
Stockholder Entities (or by wire transfer of immediately available funds, if
the Management Stockholder Entities provide to the Company wire transfer
instructions) against delivery of certificates or other instruments
representing the Stock so purchased and appropriate documents canceling the
Options so terminated, appropriately endorsed or executed by the applicable
Management Stockholder Entities or any duly authorized representative.


 


(e)  Delay of Call. Notwithstanding any other provision of this
Section 6 to the contrary and subject to Section 10(a), if there
exists and is continuing any Event, the Company shall delay the repurchase of
any of the Stock or the Options (pursuant to a Call Notice timely given in
accordance with Section 6(d) hereof) from the applicable Management
Stockholder Entities until the Repurchase Eligibility Date; provided, however,
that (i) the number of shares of Stock subject to repurchase under this
Section 6 shall be that number of shares of Stock, and (ii) in the
case of a repurchase pursuant to Section 6(a), 6(b) or 6(c), the number of
Exercisable Option Shares for purposes of calculating the Option Excess Price
payable under this Section 6 shall be the number of Exercisable Option
Shares, in each case held by the applicable Management Stockholder Entities at
the time of delivery of (and as set forth in) a Call Notice in accordance with
Section 6(d) hereof. All Options exercisable as of the date of a Call
Notice, in the case of a repurchase pursuant to Section 6(a), 6(b) or
6(c), shall continue to be exercisable until the repurchase of such Options
pursuant to such Call Notice, provided that to the extent that any
Options are exercised after the date of such Call Notice, the number of
Exercisable Option Shares for purposes of calculating the Option Excess Price
shall be reduced accordingly. Notwithstanding the foregoing, if an Event exists
and is continuing for ninety (90) days, the Management Stockholder
Entities shall be permitted by written notice to cause the Company to rescind
any Call Notice but the Company shall have another thirty (30) days from
the date the Event ceases to exist to give another Call Notice on the terms
applicable to the first Call Notice.


 


(f)  Calculation of Option Excess Price. For the avoidance of
doubt, in any instance where the Company purchases Options as set forth in
Sections 5 and 6 above, the applicable Option Excess Price shall be calculated
in tranches based on the applicable Option Exercise Prices relative to the
applicable Repurchase Price, and not on an aggregate net basis, such that the
Option Excess Price of any Options having the same Option Exercise Price, where
the Option Excess Price is greater than zero, shall not be netted
against the Option Excess Price of any Options having a different Option
Exercise Price, where the Option Excess Price is less than or equal to zero.


 


7.             Adjustment
of Repurchase Price; Definitions.


 


(a)  Adjustment of Repurchase Price. In determining the
applicable repurchase price of the Stock and Options, as provided for in
Sections 5 and 6 above, appropriate adjustments shall be made for any
stock dividends, splits, combinations, recapitalizations or


 

















 


any other adjustment
in the number of outstanding shares of Stock in order to maintain, as nearly as
practicable, the intended operation of the provisions of Sections 5 and 6.


 


(b)  Definitions. All capitalized terms used in this Agreement
and not defined herein shall have such meaning as such terms are defined in the
Option Plan. Terms used herein and as listed below shall be defined as follows:


 


“Act” shall
have the meaning set forth in Section 2(a)(i) hereof.


 


“Agreement”
shall have the meaning set forth in the introductory paragraph.


 


“Base Price”
shall have the meaning set forth in Section 1(a) hereof.


 


“Board” shall mean the board of directors of the
Company.


 


“Book Value Per Share” shall mean (a) the
Base Price plus (b) the quotient of (A)(i) the aggregate net
income of the Company from and after the Closing Date (as decreased by any net
losses from and after the Closing Date) excluding any one time costs and
expenses charged to income associated with the Closing and any related
transactions (including the transaction fee paid to affiliates of the Investors
associated with the Closing) and on an after-tax basis, any transaction,
management or other similar fees paid to the Investors or their affiliates
after the Closing Date plus (ii) the aggregate dollar amount
contributed to (or credited to common stockholders’ equity of) the Company
after the Closing Date as common stockholder’s equity of the Company (including
consideration that would be received upon the exercise of all outstanding stock
options and other rights to acquire Common Stock that would be in-the-money at the Book Value Per Share and the
conversion of all securities convertible into Common Stock and other stock
equivalents) plus (iii) to the extent reflected as deductions to
Book Value Per Share in clause (i) above, unusual or other items
recognized by the Company (including, without limitation, extraordinary
charges, and one time or accelerated write-offs of goodwill, net of the related
impact on the provision for income taxes), in each case, if and to the extent
determined in good faith by the Board, plus (iv) any debit for the
amortization of purchase accounting adjustments occurring as a result of the
Closing, minus (v) to the extent reflected as additions to Book
Value Per Share in clause (i) above, unusual or other items recognized by
the Company, in each case, if and to the extent determined in good faith by the
Board, minus (vi) the aggregate dollar amount of any dividends or
other distributions to shareholders paid by the Company after the Closing Date,
minus (vii) any credit for the amortization of purchase accounting
adjustments occurring as a result of the Closing, divided  by
(B) the sum of the number of shares of Common Stock then outstanding and
the number of shares of Common Stock issuable upon the exercise of all
outstanding stock options and other rights to acquire Common Stock that would
be in-the-money at the Book Value Per Share. The items referred to in the
calculations set forth in clauses (b)(A)(i) through (vii) of the
immediately preceding sentence shall be determined in good faith, and to the
extent possible, in accordance with Canadian generally accepted accounting
principles applied on a basis consistent with any prior periods as reflected in
the consolidated financial statements of the Company.


 


“Call Events” shall mean, collectively,
Section 6(a) Call Events, Section 6(b) Call Events, and
Section 6(c) Call Events.


 


“Call Notice” shall have the meaning set forth in
Section 6(d) hereof.


 

















 


“Call Period” shall have the meaning set forth in
Section 6(d) hereof.


 


“Canadian Securities Laws” shall have the meaning
set forth in Section 2(c) hereof.


 


“Cause” shall
mean “Cause” as such term may be defined in any employment, change in control
or severance agreement in effect at the time of termination between the
Management Stockholder and the Company or any of its subsidiaries or
Rule 405 Affiliates; or, if there is no such employment, change in control
or severance agreement or such term is not defined therein, “Cause” shall mean
(i) the Management Stockholder’s willful and continued failure to perform
his or her material duties with respect to the Company or it subsidiaries which
continues beyond ten (10) days after a written demand for substantial
performance is delivered to the Management Stockholder by the Company (the “Cure
Period”), (ii) the willful or intentional engaging by the Management
Stockholder in conduct that causes material and demonstrable injury, monetarily
or otherwise, to the Company, the Investors or their respective Rule 405
Affiliates, (iii) the commission by the Management Stockholder of any
indictable offense which carries a maximum penalty of imprisonment, or
(iv) a material breach by the Management Stockholder of this Agreement,
the Stock Option Agreement or other agreements, including, without limitation,
engaging in any action in breach of restrictive covenants, herein or therein,
that continues beyond the Cure Period (to the extent that, in the Board’s
reasonable judgment, such breach can be cured).


 


“Change in
Control” means (i) the sale (in one transaction or a series of
transactions) of all or substantially all of the assets of the Company to an
Unaffiliated Person; (ii) a sale (in one transaction or a series of
transactions) resulting in more than 50% of the voting stock of the Company
being held by an Unaffiliated Person; (iii) a merger, amalgamation,
consolidation, recapitalization or reorganization of the Company with or into
another Unaffiliated Person; if and only if
any such event listed in clauses (i) through (iii) above results in the
inability of the Investors, or any member or members of the Investors, to
designate or elect a majority of the Board (or the board of directors of the
resulting entity or its parent company). For purposes of this definition, the
term “Unaffiliated Person” means any Person or Group who is not
(x) the Investors or any member of the Investors, (y) a Rule 405
Affiliate of the Investors or any member of any Investors, or (z) an entity
in which the Investors, or any member of the Investors holds, directly or
indirectly, a majority of the economic interests in such entity.


 


“Closing”
shall have the meaning set forth in the Combination Agreement.


 


“Closing Date”
shall have the meaning set forth in the Combination Agreement.


 


“Combination
Agreement” shall have the meaning set forth in the first “whereas” paragraph.


 


“Common Stock”
shall have the meaning set forth in the first “whereas” paragraph.


 


“Company”
shall have the meaning set forth in the introductory paragraph.


 


“Confidential
Information” shall mean all non-public information concerning trade secrets,
know-how, software, developments, inventions, processes, technology, designs,
financial data, strategic business plans or any proprietary or confidential
information, documents or materials in any form or media, including any of the
foregoing relating to research, operations, finances, current and proposed
products and services, vendors,


 

















 


customers,
advertising and marketing, and other non-public, proprietary, and confidential
information of the Restricted Group.


 


“Custody
Agreement and Power of Attorney” shall have the meaning set forth in
Section 9(e) hereof.


 


“Effective
Date” shall have the meaning set forth in the introductory paragraph.


 


“Event” shall
have the meaning set forth in Section 5(c) hereof.


 


“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended (or any successor
statute thereto).


 


“Exercisable
Option Shares” shall mean the shares of Common Stock that, at the Repurchase
Calculation Date, could be purchased by the Management Stockholder upon
exercise of his outstanding and exercisable Options.


 


“Fair Market
Value Per Share” shall mean the Market Value Per Share, or, if there has been
no Qualified Public Offering, the fair market value of the Common Stock as
determined in the good faith discretion of the Board after consultation with a
third party investment banker and without any discounts for liquidity or
non-controlling interests.


 


 “Good Reason” shall mean “Good Reason” as such
term may be defined in any employment, change in control or severance agreement
in effect at the time of termination between the Management Stockholder and the
Company or any of its subsidiaries or Rule 405 Affiliates; or, if there is
no such employment, change in control or severance agreement or such term is
not defined therein, “Good Reason” shall mean, without the Management
Stockholder’s consent, (i) a reduction in the Management Stockholder’s
base salary or annual incentive compensation opportunity (other than a general
reduction in base salary or annual incentive compensation opportunities that
affects all members of senior management equally); (ii) a substantial
reduction in the Management Stockholder’s duties and responsibilities; or
(iii) a transfer of the Management Stockholder’s primary workplace by more
than fifty (50) miles from his workplace as of the Effective Date.


 


“Group” shall
mean “group,” as such term is used for purposes of Section 13(d) or 14(d)
of the Exchange Act.


 


“Holders”
shall have the meaning set forth in Section 9(d) hereof.


 


“Investors”
shall have the meaning set forth in the first “whereas” paragraph.


 


“Lock-Up
Period” shall have the meaning set forth in Section 2(e) hereof.


 


“Management
Stockholder” shall have the meaning set forth in the introductory paragraph.


 


“Management
Stockholder Entities” shall mean the Management Stockholder’s Trust, the
Management Stockholder and the Management Stockholder’s Estate, collectively.


 


“Management
Stockholder’s Estate” shall mean the conservators, guardians, executors,
administrators, testamentary trustees, legatees or beneficiaries of the
Management Stockholder.


 

















 


“Management
Stockholder’s Trust” shall mean a partnership, limited liability company, corporation,
trust or custodianship, the beneficiaries of which may include only the
Management Stockholder, his spouse (or ex-spouse) or his lineal descendants
(including adopted) or, if at any time after any such transfer there shall be
no then living spouse or lineal descendants, then to the ultimate beneficiaries
of any such trust or to the estate of a deceased beneficiary.


 


“Market Value
Per Share” shall mean, on the Repurchase Calculation Date, the price per share
equal to (i) the last sale price of the Common Stock on the Repurchase
Calculation Date on the principal stock exchange on which the Common Stock may
at the time be listed or, (ii) if there shall have been no sales on such
exchange on the Repurchase Calculation Date on any given day, the average of
the closing bid and asked prices of the Common Stock on such exchange on the
Repurchase Calculation Date or, (iii) if there is no such bid and asked
price on the Repurchase Calculation Date, the average of the closing bid and
asked prices of the Common Stock on the next preceding date when such bid and
asked price occurred or, (iv) if the Common Stock shall not be so listed,
the closing sales price of the Common Stock as reported by NASDAQ on the
Repurchase Calculation Date in the over-the-counter market.


 


“Masonite”
shall have the meaning set forth in the first “whereas” paragraph.


 


“Maximum
Repurchase Amount” shall have the meaning set forth in Section 10(a)
hereof.


 


“Millennium”
shall have the meaning set forth in the first “whereas” paragraph.


 


“Net Settled
Stock” shall have the meaning set forth in Section 5(a)(ii) hereof.


 


“New Options”
shall have the meaning set forth in the third “whereas” paragraph.


 


 “Notice” shall have the meaning set forth in
Section 9(b) hereof.


 


“Offeror”
shall have the meaning set forth in Section 4(a) hereof.


 


“Option” shall
have the meaning set forth in the third “whereas” paragraph.


 


“Option Excess
Price” shall mean, with respect to any Option, the aggregate amount paid or
payable by the Company in respect of Exercisable Option Shares pursuant to
Section 5 or 6, as applicable.


 


“Option
Exercise Price” shall mean the then-current exercise price of the shares of
Common Stock covered by the applicable Option.


 


“Option Plan”
shall have the meaning set forth in the third “whereas” paragraph.


 


“Option Stock”
shall have the meaning set forth in Section 2(a) hereof.


 


“Other
Management Stockholders” shall have the meaning set forth in the fourth “whereas”
paragraph.


 


“Other
Management Stockholders’ Agreements” shall have the meaning set forth in the
fourth “whereas” paragraph.


 

















 


“Parties”
shall have the meaning set forth in the introductory paragraph.


 


“Permanent
Disability” shall mean “Disability” or “Permanent Disability” (as applicable)
as such term may be defined in any employment, change in control or severance
agreement in effect at the time of termination between the Management
Stockholder and the Company or any of its subsidiaries or Rule 405
Affiliates; or, if there is no such employment, change in control or severance
agreement or such term is not defined therein, “Permanent Disability” shall
mean the Management Stockholder becomes physically or mentally incapacitated
and is therefore unable for a period of six (6) consecutive months or for
an aggregate of nine (9) months in any twelve (12) consecutive month period to
perform substantially all of the material elements of the Management
Stockholder’s duties with the Company or any subsidiary or Rule 405
Affiliate thereof. Any question as to the existence of the Permanent Disability
of the Management Stockholder as to which the Management Stockholder and the
Company cannot agree shall be determined in writing by a qualified independent
physician mutually acceptable to the Management Stockholder and the Company. If
the Management Stockholder and the Company cannot agree as to a qualified
independent physician, each shall appoint such a physician and those two
physicians shall select a third who shall make such determination in writing. The
determination of Permanent Disability made in writing to the Company and the
Management Stockholder shall be final and conclusive for all purposes of this
Agreement.


 


“Person” shall
mean “person,” as such term is used for purposes of Section 13(d) or 14(d)
of the Exchange Act.


 


“Piggyback
Registration Rights” shall have the meaning set forth in Section 9(a)
hereof.


 


“Proposed
Registration” shall have the meaning set forth in Section 9(b) hereof.


 


“Proposed Sale”
shall have the meaning set forth in Section 4(c) hereof.


 


“Proposed Sale
Notice” shall have the meaning set forth in Section 4(c) hereof.


 


“Public
Offering” shall mean the sale of shares of Common Stock to the public
subsequent to the date hereof pursuant to a (final) prospectus under Canadian
Securities Laws or pursuant to a registration statement under the Act which has
been declared effective by the SEC (other than a registration statement on
Form S-4, S-8 or any other similar form).


 


“Purchased
Stock” shall have the meaning set forth in the Section 1(a) hereof.


 


“Put Period”
shall have the meaning set forth in Section 5(a) hereof.


 


“Qualified
Public Offering” shall mean a Public Offering, which results in an active
trading market of 25% or more of the Common Stock.


 


“Redemption
Notice” shall have the meaning set forth in Section 5(c) hereof.


 


“Registration
Rights Agreement” shall have the meaning set forth in Section 9(a) hereof.


 

















 


“Repurchase
Calculation Date” shall mean the last day of the month preceding the later of
(i) the month in which the event giving rise to the right to repurchase
occurs and (ii) the month in which the Repurchase Eligibility Date occurs.


 


“Repurchase
Eligibility Date” shall have the meaning set forth in Section 5(d) hereof.


 


“Repurchase
Price” shall mean the amount to be paid in respect of the Stock and Options to
be purchased by the Company pursuant to Section 6(a), 6(b), or 6(c), as
applicable.


 


“Request”
shall have the meaning set forth in Section 9(b) hereof.


 


“Restricted
Group” shall mean, collectively, the Company, its subsidiaries, the Investors
and their respective Rule 405 Affiliates.


 


“Rule 405
Affiliate” shall mean an affiliate of the Company as defined under
Rule 405 of the rules and regulations promulgated under the Act and as
interpreted in good faith by the Board.


 


“Sale
Participation Agreement” shall mean that certain sale participation agreement
entered into by and between the Management Stockholder and the Investors dated
as of the date hereof.


 


“SEC” shall
mean the Securities and Exchange Commission.


 


“Section 5
Repurchase Price” shall have the meaning set forth in Section 5(a) hereof.


 


“Section 6(a)
Call Event” shall have the meaning set forth in Section 6(a) hereof.


 


“Section 6(a)
Repurchase Price” shall have the meaning set forth in Section 6(a) hereof.


 


“Section 6(b)
Call Event” shall have the meaning set forth in Section 6(b) hereof.


 


“Section 6(c)
Call Event” shall have the meaning set forth in Section 6(c) hereof.


 


“Settled Stock
Put Period” shall have the meaning set forth in Section 5(b) hereof.


 


“Stock” shall
have the meaning set forth in Section 3 hereof.


 


“Stock Option
Agreement” shall have the meaning set third in the fourth “whereas” paragraph.


 


 “Third Party Offer” shall have the meaning set
forth in Section 4(a) hereof.


 


“Transfer”
shall have the meaning set forth in Section 2(a) hereof.


 


8.             The
Company’s Representations and Warranties.


 


(a)  The Company represents and
warrants to the Management Stockholder that (i) this Agreement has been
duly authorized, executed and delivered by the Company and is enforceable
against the Company in accordance with its terms and (ii) the Stock, when


 

















 


issued and delivered
in accordance with the terms hereof and the other agreements contemplated
hereby, will be duly and validly issued, fully paid and nonassessable.


 


(b)  If the Company becomes subject
to the reporting requirements of Section 12 of the Exchange Act, the
Company will file the reports required to be filed by it under the Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder, to
the extent required from time to time to enable the Management Stockholder to
sell shares of Stock without registration under the Exchange Act within the
limitations of the exemptions provided by (A) Rule 144 under the Act,
as such rule may be amended from time to time, or (B) any similar rule or
regulation hereafter adopted by the SEC. Notwithstanding anything contained in
this Section 8(b), the Company may de-register under Section 12 of
the Exchange Act if it is then permitted to do so pursuant to the Exchange Act
and the rules and regulations thereunder and, in such circumstances, shall not
be required hereby to file any reports which may be necessary in order for
Rule 144 or any similar rule or regulation under the Act to be available. Nothing
in this Section 8(b) shall be deemed to limit in any manner the
restrictions on sales of Stock contained in this Agreement.


 


9.             “Piggyback”
Registration Rights. Effective upon the date of this Agreement and until
the later of (i) the occurrence of a Qualified Public Offering and
(ii) the fifth anniversary of the Effective Date:


 


(a)  The Management Stockholder
hereby agrees to be bound by all of the terms, conditions and obligations of
the piggyback registration rights contained in Section 2 of the
Registration Rights Agreement (the “Registration Rights Agreement”)
entered into by and among the Company and investors party thereto (the “Piggyback
Registration Rights”), as in effect on the date hereof (subject to any
amendments thereto to which the Management Stockholder has agreed in writing to
be bound), and, if the Investors are selling stock, shall have all of the
rights and privileges of the Piggyback Registration Rights (including, without
limitation, the right to participate in the Qualified Public Offering and any
rights to indemnification and/or contribution from the Company and/or the
Investors), in each case as if the Management Stockholder were an original
party (other than the Company) to the Registration Rights Agreement, subject to
applicable and customary underwriter restrictions; provided, however,
that at no time shall the Management Stockholder have any rights to request
registration under Section 3 of the Registration Rights Agreement; and provided
further, that the Management Stockholder shall not be bound by any
amendments to the Registration Rights Agreement unless the Management
Stockholder consents in writing thereto provided that such consent will
not be unreasonably withheld. All Stock, whether acquired upon the exercise of
an Option or not, purchased or held by the applicable Management Stockholder
Entities pursuant to this Agreement shall be deemed to be “Registrable
Securities” as defined in the Registration Rights Agreement.


 


(b)  In the event of a sale of
Common Stock by the Investors in accordance with the terms of the Registration
Rights Agreement, the Company will promptly notify the Management Stockholder
in writing (a “Notice”) of any proposed qualification for sale of shares
by prospectus or registration (a “Proposed Registration”). If within
five (5) days of the receipt by the Management Stockholder of such Notice,
the Company receives from the applicable Management Stockholder Entities a
written request (a “Request”) to qualify for sale by prospectus or
register shares of Stock held by the applicable Management Stockholder Entities
(which Request will be irrevocable unless otherwise mutually agreed to in
writing by the Management Stockholder and the Company), shares of Stock will be
so qualified for sale by prospectus or registered as provided in this Section 9;
provided,


 

















 


however, that for each such prospectus
or registration statement only one Request, which shall be executed by the
applicable Management Stockholder Entities, may be submitted for all
Registrable Securities held by the applicable Management Stockholder Entities.


 


(c)  The maximum number of shares
of Stock which will be qualified for sale by prospectus or registered pursuant
to a Request will be the lowest of (i) the number of shares of Stock then
held by the Management Stockholder Entities, including all shares of Stock
which the Management Stockholder Entities are then entitled to acquire under an
unexercised Option to the extent then exercisable, multiplied by a fraction,
the numerator of which is the number of shares of Stock being sold by the Investors
and any affiliated or unaffiliated investment partnerships and investment
limited liability companies investing with the Investors and the denominator of
which is the aggregate number of shares of Stock owned by the Investors and any
investment partnerships and investment limited liability companies investing
with the Investors or (ii) the maximum number of shares of Stock which the
Company can qualify for sale by prospectus or register in the Proposed
Registration without adverse effect on the offering in the view of the managing
underwriters (reduced pro rata as more fully described in subsection (d)
of this Section 9) or (iii) the maximum number of shares which the
Management Stockholder (pro rata based upon the aggregate number of shares of
Stock the Management Stockholder and all Other Management Stockholders have
requested to be registered) is permitted to qualify for sale or register under
the Piggyback Registration Rights.


 


(d)  If a Proposed Registration
involves an underwritten offering and the managing underwriter advises the
Company in writing that, in its opinion, the number of shares of Stock
requested to be included in the Proposed Registration exceeds the number which
can be sold in such offering, so as to be likely to have an adverse effect on
the price, timing or distribution of the shares of Stock offered in such Public
Offering as contemplated by the Company, then the Company will include in the
Proposed Registration (i) first, 100% of the shares of Stock the Company
proposes to sell and (ii) second, to the extent of the number of shares of
Stock requested to be included in the Proposed Registration which, in the
opinion of such managing underwriter, can be sold without having the adverse
effect referred to above, the number of shares of Stock which the selling
Investors and any affiliated or unaffiliated investment partnerships and
investment limited liability companies investing with the selling Investors,
the Management Stockholder and all Other Management Stockholders (together, the
“Holders”) have requested to be included in the Proposed Registration,
such amount to be allocated pro rata among all requesting Holders on the basis
of the relative number of shares of Stock then held by each such Holder
(including upon exercise of all exercisable Options) (provided that any
shares thereby allocated to any such Holder that exceed such Holder’s request
will be reallocated among the remaining requesting Holders in like manner).


 


(e)  Upon delivering a Request, the
Management Stockholder will, if requested by the Company, execute and deliver a
custody agreement and power of attorney having customary terms and in form and
substance reasonably satisfactory to the Company with respect to the shares of
Stock to be registered pursuant to this Section 9 (a “Custody Agreement
and Power of Attorney”). The Custody Agreement and Power of Attorney will
provide, among other things, that the Management Stockholder will deliver to
and deposit in custody with the custodian and attorney-in-fact named therein a
certificate or certificates (to the extent applicable) representing such shares
of Stock (duly endorsed in blank by the registered owner or owners thereof or
accompanied by duly executed stock powers in blank)


 





















 


and irrevocably
appoint said custodian and attorney-in-fact as the Management Stockholder’s
agent and attorney-in-fact with full power and authority to act under the
Custody Agreement and Power of Attorney on the Management Stockholder’s behalf
with respect to the matters specified therein.


 


(f)  If the number of shares of
Stock that the Management Stockholder is permitted to include in a Request
pursuant to this Section 9 is limited by the fact that the Options are not
exercisable at the time of such Proposed Registration, then at such time as the
Options become exercisable (in whole or in part) and at any time thereafter,
the Management Stockholder shall be entitled to register for public sale as
part of any subsequent Proposed Registration such additional number of shares
of Stock as the Management Stockholder could have registered at the time of the
initial Proposed Registration.


 


(g)  The Management Stockholder
agrees that he will execute such other agreements as the Company may reasonably
request to further evidence the provisions of this Section 9.


 


10.           Pro
Rata Repurchases; Dividends.


 


(a)  Notwithstanding anything to
the contrary contained in Section 5 or 6, if at any time consummation of
any purchase or payment to be made by the Company pursuant to this Agreement
and the Other Management Stockholders Agreements would result in an Event, then
the Company shall make purchases from, and payments to, the Management
Stockholder and Other Management Stockholders pro rata (on the basis of the
proportion of the number of shares of Stock each such Management Stockholder
and all Other Management Stockholders have elected or are required to sell to
the Company) for the maximum number of shares of Stock permitted without
resulting in an Event (the “Maximum Repurchase Amount”). The provisions
of Section 5(d) and 6(e) shall apply in their entirety to payments and
repurchases with respect to shares of Stock which may not be made due to the
limits imposed by the Maximum Repurchase Amount under this Section 10(a). Until
all of such Stock is purchased and paid for by the Company, the Management
Stockholder and the Other Management Stockholders whose Stock is not purchased
in accordance with this Section 10(a) shall have priority, on a pro rata
basis, over other purchases of Stock by the Company pursuant to this Agreement
and Other Management Stockholders’ Agreements.


 


(b)  In the event any dividends are
paid with respect to the Stock, the Management Stockholder will be treated in
the same manner as all other holders of Common Stock with respect to shares of
Stock then owned by the Management Stockholder, and, with respect to any
Options held by the Management Stockholder, in accordance, as applicable, with
Section 2.4 of the Stock Option Agreement.


 


11.           Rights
to Negotiate Repurchase Price. Nothing in this Agreement shall be deemed to
restrict or prohibit the Company from purchasing, redeeming or otherwise
acquiring for value shares of Stock or Options from the Management Stockholder,
at any time, upon such terms and conditions, and for such price, as may be mutually
agreed upon in writing between the Parties hereto, whether or not at the time
of such purchase, redemption or acquisition circumstances exist which
specifically grant the Company the right to purchase, or the Management
Stockholder the right to sell, shares of Stock or any Options under the terms
of this Agreement; provided that no such purchase, redemption or
acquisition shall be consummated, and no agreement with respect to any such
purchase, redemption or acquisition shall be entered into, without the prior
approval of the Board.


 

















 


12.           Covenant
Regarding 83(b) Election. Except as the Company may otherwise agree in
writing, to the extent applicable, the Management Stockholder hereby covenants
and agrees that he will make an election provided pursuant to Treasury
Regulation Section 1.83-2 with respect to the Stock, including without
limitation, the Stock to be acquired upon each exercise of the Management
Stockholder’s Options; and the Management Stockholder further covenants and
agrees that he will furnish the Company with copies of the forms of election
the Management Stockholder files within thirty (30) days after the date
hereof, and within thirty (30) days after each exercise of Management
Stockholder’s Options and with evidence that each such election has been filed
in a timely manner.


 


13.           Notice
of Change of Beneficiary. Immediately prior to any transfer of Stock to a
Management Stockholder’s Trust, the Management Stockholder shall provide the
Company with a copy of the instruments creating the Management Stockholder’s
Trust and with the identity of the beneficiaries of the Management Stockholder’s
Trust. The Management Stockholder shall notify the Company as soon as
practicable prior to any change in the identity of any beneficiary of the Management
Stockholder’s Trust.


 


14.           Recapitalizations,
etc. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Stock or the Options, to any and all shares of
capital stock of the Company or any capital stock, partnership units or any
other security evidencing ownership interests in 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 substitution of the Stock or
the Options by reason of any stock dividend, split, reverse split, combination,
recapitalization, liquidation, reclassification, merger, amalgamation,
consolidation or otherwise.


 


15.           Management
Stockholder’s Employment by the Company. Nothing contained in this
Agreement or in any other agreement entered into by the Company and the
Management Stockholder contemporaneously with the execution of this Agreement
(subject to, and except as set forth in, the applicable provisions of any offer
letter or letter of employment provided to the Management Stockholder by the
Company or any employment agreement entered by and between the Management
Stockholder and the Company) (i) obligates the Company or any subsidiary
of the Company to employ the Management Stockholder in any capacity whatsoever
or (ii) prohibits or restricts the Company (or any such subsidiary) from
terminating the employment of the Management Stockholder at any time or for any
reason whatsoever, with or without Cause, and the Management Stockholder hereby
acknowledges and agrees that neither the Company nor any other person has made
any representations or promises whatsoever to the Management Stockholder
concerning the Management Stockholder’s employment or continued employment by
the Company or any subsidiary of the Company.


 


16.           Binding
Effect. The provisions of this Agreement shall be binding upon and accrue
to the benefit of the Parties hereto and their respective heirs, legal
representatives, successors and assigns. In the case of a transferee permitted
under clause (y) or (z) of Section 2(a) or Section 3 hereof, such
transferee shall be deemed the Management Stockholder hereunder; provided,
however, that no transferee (including without limitation, transferees
referred to in Section 2(a) or Section 3 hereof) shall derive any
rights under this Agreement unless and until such transferee has delivered to
the Company a valid undertaking and becomes bound by the terms of this
Agreement.


 

















 


17.           Amendment.
This Agreement may be amended only by a written instrument signed by the
Parties hereto.


 


18.           Closing.
Except as otherwise provided herein, the closing of each purchase and sale of
shares of Stock pursuant to this Agreement shall take place at the principal
office of the Company on the tenth business day following delivery of the
notice by either Party to the other of its exercise of the right to purchase or
sell such Stock hereunder.


 


19.           Applicable
Law; Jurisdiction; Arbitration; Legal Fees.


 


(a)  The laws of the Province of
Ontario (and the laws of Canada applicable therein) applicable to contracts
executed and to be performed entirely in such province shall govern the
interpretation, validity and performance of the terms of this Agreement.


 


(b)  In the event of any
controversy among the Parties hereto arising out of, or relating to, this
Agreement which cannot be settled amicably by the Parties hereto, such
controversy shall be finally, exclusively and conclusively settled by mandatory
arbitration conducted expeditiously in accordance with the American Arbitration
Association rules by a single independent arbitrator. Such arbitration process
shall take place within 50 miles of the City of Toronto, Ontario, Canada. The
decision of the arbitrator shall be final and binding upon all Parties hereto
and shall be rendered pursuant to a written decision, which contains a detailed
recital of the arbitrator’s reasoning. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof.


 


(c)  Notwithstanding the foregoing,
the Management Stockholder acknowledges and agrees that the Company, its
subsidiaries, the Investors and any of their respective Rule 405
Affiliates shall be entitled to injunctive or other relief in order to enforce
the covenant not to compete, covenant not to solicit and/or confidentiality
covenants as set forth in Section 24(a) of this Agreement.


 


(d)  In the event of any
arbitration or other disputes with regard to this Agreement or any other
document or agreement referred to herein, each Party shall pay its own legal
fees and expenses. Notwithstanding anything herein to the contrary, if any
employment, change in control or severance agreement in effect between the
Management Stockholder and the Company or any of its subsidiaries or Rule 405
Affiliates contains a similar provision relating to arbitration and/or dispute
resolution, such provision in such agreement shall govern any controversy
hereunder.


 


20.           Assignability
of Certain Rights by the Company. The Company shall have the right to
assign any or all of its rights or obligations to purchase shares of Stock
pursuant to Sections 4, 5 and 6 hereof.


 


21.           Miscellaneous.


 


(a)  In this Agreement all
references to “dollars” or “$” are to U.S. dollars and the masculine pronoun
shall include the feminine and neuter, and the singular the plural, where the
context so indicates


 


(b)  If any provision of this
Agreement shall be declared illegal, void or unenforceable by any court of
competent jurisdiction, the other provisions shall not be affected, but shall
remain in full force and effect.


 

















 


(c)  If
any payments of money, delivery of shares of Common Stock or other benefits due
to the Management Stockholder hereunder could cause the application of an
accelerated or additional tax under Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), such payments, delivery of shares or other
benefits shall be deferred if deferral will make such payment, delivery of
shares or other benefits compliant under Section 409A of the Code, otherwise
such payment, delivery of shares or other benefits shall be restructured, to
the extent possible, in a manner, determined by the Company and reasonably
acceptable to the Management Stockholder, that does not cause such an
accelerated or additional tax.


 


22.           Withholding.
The Company or its subsidiaries shall have the right to deduct from any cash
payment made under this Agreement to the applicable Management Stockholder
Entities any minimum federal, provincial, state or local income or other taxes
required by law to be withheld with respect to such payment.


 


23.           Notices.
All notices and other communications provided for herein shall be in writing. Any
notice or other communication hereunder shall be deemed duly given
(i) upon electronic confirmation of facsimile, (ii) one business day
following the date sent when sent by overnight delivery and
(iii) five (5) business days following the date mailed when mailed by
registered or certified mail return receipt requested and postage prepaid, in
each case as follows:


 


(a)  If to the Company, to it at
the following address:


 


Masonite Holding Corporation

c/o Masonite International Corporation


1600 Britannia Road East


Mississauga, Ontario


Canada L4W 1J2


Attention: 
General Counsel

Telecopy:  (905) 670-6870


 


with copies to:


 


Kohlberg Kravis Roberts & Co.


9 West 57th Street


New York, New York 10019


Attention: 
Paul Raether


 


and


 


Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention:  Gary I. Horowitz, Esq.


Telecopy: 
(212) 455-2502


 


(b)  If to the Management Stockholder,
to him at the address set forth below under his signature; or at such other
address as either party shall have specified by notice in writing to the other.


 

















 


24.           Confidential
Information; Covenant Not to Compete.


 


(a)  In consideration of the Company
entering into this Agreement with the Management Stockholder, the Management
Stockholder hereby agrees effective as of the date of the Management
Stockholder’s commencement of employment with the Company or its Subsidiaries,
without the Company’s prior written consent, the Management Stockholder shall
not, directly or indirectly, (i) at any time during or after the
Management Stockholder’s employment with the Company or its Subsidiaries,
disclose any Confidential Information pertaining to the business of the
Company, the Investors, or any of their respective Rule 405 Affiliates (except
when required to perform his or her duties to the Company or one of its
Subsidiaries, by law or judicial process) or disparage the Company, the
Investors, or any of their respective Rule 405 Affiliates; or (ii) at any
time during the Management Stockholder’s employment with the Company or its
Subsidiaries and for a period of eighteen (18) months thereafter, directly or
indirectly (A) act as a proprietor, investor, director, officer, employee,
substantial stockholder, consultant, or partner in any business that
directly or indirectly competes with the business of the Company, the Investors, or any of their
respective Rule 405 Affiliates, (B) solicit customers or clients of the
Company or any of its Subsidiaries to terminate their relationship with the
Company or any of its Subsidiaries or otherwise solicit such customers or
clients to compete with any business of the Company, the Investors, or any of their
respective Rule 405 Affiliates or (C) solicit or offer employment to any
person who has been employed by the Company or any of its Subsidiaries at any
time during the twelve (12) months immediately preceding the termination
of the Management Stockholder’s employment; provided, however,
that the foregoing clause (ii) shall not apply with respect to any Rule 405
Affiliates that are engaged in a business substantially different that that of
the Company or any of its Subsidiaries. If the Management Stockholder is bound
by any other agreement with the Company regarding the use or disclosure of
confidential information, the provisions of this Agreement shall be read in
such a way as to further restrict and not to permit any more extensive use or
disclosure of confidential information.


 


(b)  Notwithstanding
clause (a) above, if at any time a court holds that the restrictions
stated in such clause (a) are unreasonable or otherwise unenforceable
under circumstances then existing, the Parties hereto agree that the maximum
period, scope or geographic area determined to be reasonable under such
circumstances by such court will be substituted for the stated period, scope or
area. Because
the Management Stockholder’s services are unique and because the Management
Stockholder has had access to Confidential Information, the Parties hereto
agree that money damages will be an inadequate remedy for any breach of this
Agreement. In the event of a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive relief in order to enforce, or
prevent any violations of, the provisions hereof (without the posting of a bond
or other security).


 


(c)  In
the event that the Management Stockholder breaches any of the provisions of
Section 24(a), in addition to all other remedies that may be available to
the Company, such Management Stockholder shall be required to pay to the
Company any amounts actually paid to him or her by the Company in respect of
any repurchase by the Company of the Option or shares of Common Stock
underlying the Option held by such Management Stockholder.


 


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intentionally left blank.)


 

















 


	
   

  	
   

  	
  MASONITE HOLDING CORPORATION

  	
   

  
	
   

  	
   

  	
  (formerly

  	
   

  
	
   

  	
   

  	
  STILE HOLDING CORP.)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MANAGEMENT
  STOCKHOLDER:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ADDRESS: