Stockholders Agreement

EXHIBIT 10.10 EXECUTION COPY STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT dated as of November 30, 2004 (this "Agreement")among AFFINIA GROUP HOLDINGS INC., a Delaware corporation ("Parent"), CYPRESSMERCHANT BANKING PARTNERS II L.P., a Delaware limited partnership ("CypressOnshore"), CYPRESS MERCHANT BANKING II C.V., a limited partnership formed underthe laws of The Netherlands ("Cypress Offshore"), 55TH STREET PARTNERS II L.P.,a Delaware limited partnership ("55th Street"), CYPRESS SIDE-BY-SIDE LLC, aDelaware limited liability company ("Side-by-Side" and, together with CypressOnshore, Cypress Offshore and 55th Street, the "Cypress Group"), ONTARIOMUNICIPAL EMPLOYEES RETIREMENT BOARD, a corporation established under theOntario Municipal Employees Retirement System Act ("OMERS"), THE NORTHWESTERNMUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation ("NW Mutual"), CALIFORNIASTATE TEACHERS' RETIREMENT SYSTEM, a government employee benefit plan("CalSTRS"), and STOCKWELL FUND, L.P., a Delaware limited partnership("Stockwell"). WHEREAS, each Stockholder (as defined below) has entered into asubscription agreement with Parent (each a "Subscription Agreement") pursuant towhich such Stockholder has agreed to acquire shares of Common Stock (as definedbelow) and to enter into this Agreement; WHEREAS, pursuant to the Stock and Asset Purchase Agreement, dated as ofJuly 8, 2004 (the "Purchase Agreement") between Affinia Group Inc. (f/k/a AAGOpco Corp.), a Delaware corporation ("Affinia") and an indirect, wholly ownedsubsidiary of Parent, and Dana Corporation, a Virginia corporation ("Dana"),Affinia will purchase the automotive aftermarket business from Dana; WHEREAS, as of the date hereof, as a result of the consummation of thetransactions contemplated by the Subscription Agreements: (i) Cypress Onshoreowns 825,214.3427 shares of Common Stock; (ii) Cypress Offshore owns 35,081.2121shares of Common Stock; (iii) 55th Street owns 7,963.4352 shares of CommonStock; (iv) Side-by-Side owns 1,740 shares of Common Stock; (v) OMERS owns280,000 shares of Common Stock; (vi) NW Mutual owns 160,000 shares of CommonStock; (vii) CalSTRS owns 80,000 shares of Common Stock; and Stockwell owns30,000 shares of Common Stock; WHEREAS, the parties desire to enter into an agreement which imposescertain restrictions and obligations on themselves, and on the shares of capitalstock of Parent in order to promote their mutual interests. NOW, THEREFORE, in consideration of the mutual promises and agreements setforth herein, the adequacy of which is hereby acknowledged, the parties heretoagree as follows: ARTICLE I DEFINED TERMS; INTERPRETATION 1.1. Terms. As used in this Agreement, the following terms shall have themeanings set forth below. 2 "Affiliate" of any Person means any other Person directly or indirectlycontrolling, controlled by or under common control with such Person. The term"control" means, with respect to any Person, the power to direct or cause thedirection of the management or policies of such Person, directly or indirectly,whether through the ownership of voting securities, by contract or otherwise;and the terms "controlling" and "controlled" have meanings correlative to theforegoing. "Board of Directors" means the Board of Directors of Parent. "Business Day" means any day other than a Saturday, Sunday or day on whichcommercial banks in New York, New York or Toronto, Ontario are authorized orrequired by law to remain closed. "Call Period" means the period beginning on the date of delivery of an IPODemand Notice and ending upon the earlier of (x) the 91st day after delivery ofsuch IPO Demand Notice and (y) the commencement of bona fide "road shows" inrespect of a Public Offering with respect to such IPO Demand Notice. "Charter Documents" means the Certificate of Incorporation and the Bylawsof Parent, as amended from time to time. "Common Stock" means the common stock, par value $.01 per share, of Parentor any other capital stock of Parent into which such stock is reclassified orreconstituted. "Convertible Security" means any security of Parent which is convertibleinto or exercisable or exchangeable for Common Stock, whether or not theconversion, exercisability or exchangeability of such security is subject to thepassage of time or any event or contingency. "Cypress Member" means each of Side-by-Side, Cypress Onshore, CypressOffshore and 55th Street and their Permitted Transferees. "Demand Registration" means registration requested pursuant to Sections5.2(a) or 5.3. "Fully Diluted Shares" means, with respect to any Stockholder at any time,a number of shares of Common Stock equal to the sum of (i) the number of suchStockholder's Shares plus (ii) the number of shares of Common Stock that suchStockholder would acquire upon the conversion, exercise or exchange of allConvertible Securities then owned by such Stockholder, but only to the extentsuch Convertible Securities are then (or, if being determined in connection witha Transfer, at the time of Transfer will be) vested, exercisable and"in-the-money". "Illiquid Consideration" means assets that are not cash or MarketableSecurities. "Independent" means, with respect to any Person, that such Person is not anAffiliate of any Stockholder or Parent. "Investor Group Stockholders" means OMERS, NW Mutual, CalSTRS, andStockwell. "IPO Completion Date" means the first date upon which shares of CommonStock are sold pursuant to a Registration Statement. "Line of Business" means the design, manufacture and distribution of (A)aftermarket automotive parts, including brake drums and rotors, calipers, brakepads and shoes, hydraulic brake system components, chassis, steering andsuspension components, shock absorbers and coil springs, together 3with related services, including design engineering, catalog, electronicinterface and technical assistance, (B) original equipment automotive parts,including brake drums and rotors, calipers, shock absorbers, coil springs andsteering components for light- and medium-duty vehicle applications and (C)aftermarket and original equipment filtration products for light-, medium- andheavy-duty vehicle applications, including oil, fuel, cabin, water separationand air filters. "Marketable Securities" means securities that are traded on an establishedUnited States or foreign securities exchange, reported through the NationalAssociation of Securities Dealers, Inc. Automated Quotation System or comparableforeign established over-the-counter trading system, otherwise tradedover-the-counter or traded on PORTAL (in the case of securities eligible fortrading pursuant to Rule 144A); provided that any such securities shall bedeemed "Marketable Securities" only if they are freely tradable or are thesubject of registration rights under applicable securities laws. Freely tradablefor this purpose shall mean securities that either are (A) transferable by aStockholder pursuant to a then effective registration statement under theSecurities Act (or similar applicable statutory provision in the case of foreignsecurities), (B) transferable by a Stockholder who is not an Affiliate of theissuer pursuant to Rule 144(k) under the Securities Act or any successor rulethereto (or similar applicable rule in the case of foreign securities) or (C)transferable by a Stockholder pursuant to Rule 144A (which shall include (x) acovenant by the issuer of such security to comply with the reporting andinformational requirements under Rule 144A and (y) eligibility for trading suchsecurities on PORTAL). "NW Mutual Member" means NW Mutual and its Permitted Transferees. "OMERS Member" means OMERS and its Permitted Transferees. "Permitted Transferee" means, (i) in the case of each Cypress Member (1) any other Cypress Member or any Affiliate (other than an individual) of Cypress Associates II LLC or any of its managing members; (2) any general or limited partner, member, director, officer or employee of such Cypress Member (or other entity referred to in clause (1)); (3) the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of any of the individuals referred to in clause (2); (4) for estate planning purposes, any trust, the beneficiaries of which include only (A) Permitted Transferees referred to in clauses (1), (2) and (3) and (B) parents, spouses and lineal descendants of Permitted Transferees referred to in clause (2); (5) a corporation, partnership or other entity, a majority of the equity of which is owned and controlled by such entity and/or Permitted Transferees referred to in clauses (1), (2), (3) and (4); and (6) any bank or financial institution to which a bona fide pledge of Shares is made, provided that immediately following any foreclosure upon such pledged Shares, such bank or financial institution shall cease to be a Permitted Transferee for all purposes of this Agreement; and (ii) in the case of the Investor Group Stockholders (1) any Affiliate (other than an individual) of any Investor Group Stockholder; (2) any general or limited partner, member, director, officer or employee of such Investor Group Stockholder (or other entity referred to in clause (1)); (3) the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of any of the individuals referred to in clause (2); (4) for estate planning purposes, any trust, the beneficiaries of which include only (A) Permitted Transferees referred to in clauses (1), (2) and (3) and (B) parents, spouses and lineal descendants of Permitted Transferees referred to in clause (2); (5) a corporation, partnership or other entity, a majority of the equity of which is owned and controlled by such entity and/or Permitted Transferees referred to in clauses (1), (2), (3) and (4); and (6) any bank or financial institution to which a bona fide pledge of Shares is made, provided that immediately following any foreclosure upon such pledged Shares, such bank or financial 4 institution shall cease to be a Permitted Transferee for all purposes of this Agreement; "Person" means any individual, firm, corporation, partnership, limitedliability company, trust, incorporated or unincorporated association, jointventure, joint stock company, governmental body or other entity of any kind. "Public Offering" means any offer for sale of Common Stock or other equitysecurities of Parent or any of its subsidiaries pursuant to an effectiveRegistration Statement. "Registration Statement" means a registration statement filed pursuant tothe Securities Act. "Rule 144" means Rule 144 under the Securities Act, or any successor rule. "SEC" means the Securities and Exchange Commission or any similar agencythen having jurisdiction to enforce the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, and therules and regulations of the SEC thereunder. "Shares" means, with respect to any Stockholder, all outstanding shares,whether now owned or hereafter acquired, of Common Stock owned by suchStockholder. "Stockholder" means each party to this Agreement from time to time otherthan Parent including any Transferee of Shares who agrees as provided for inSection 2.1(c)(ii). "Stockwell Member" means Stockwell and its Permitted Transferees. "Total Fully Diluted Shares" means, at any time, a number of shares ofCommon Stock equal to the sum of (i) the number of shares of Common Stock thenoutstanding plus (ii) the number of shares of Common Stock that would be issuedas a result of the conversion, exercise or exchange of all ConvertibleSecurities then outstanding, but only to the extent such Convertible Securitiesare then (or, if being determined in connection with a Transfer, at the time ofTransfer will be) vested, exercisable and "in-the-money". 1.2. Other Definitions. The following terms are defined within thisAgreement in the Sections noted below.Term Section- ---- -------55th Street PreambleAffinia PreambleAgreement PreambleBring-Along Stockholders [SS] 2.5(a)Buyout Notice [SS] 2.5(a)CalSTRS PreambleCall Notice [SS] 5.2(b)Call Right [SS] 5.2(b)Called Shares [SS] 5.2(b)Cypress Directors [SS] 4.2(a)Cypress Group PreambleCypress Independent Directors [SS] 4.2(c)Cypress Offshore Preamble 5Cypress Onshore PreambleDana PreambleDemand Holder [SS] 5.1Designated Percentage [SS] 2.5(a)Fair Market Value [SS] 5.2(b)Final Buyout Notice [SS] 5.2(c)Final Sale [SS] 5.2(c)Final Sales Notice [SS] 5.2(c)Holder [SS] 5.1indemnified party [SS] 5.12(c)indemnifying party [SS] 5.12(c)Independent Directors [SS] 4.2(e)Investors' Director [SS] 4.2(b)IPO Demand Notice [SS] 5.2(a)Last-Chance Notice [SS] 2.3(c)NASD [SS] 5.9New Issuance [SS] 3.1(a)NW Mutual PreambleNotice Period [SS] 2.3(b)Offer Price [SS] 2.3(a)Offered Shares [SS] 2.3(a)Offeree Stockholders [SS] 2.3(a)Offering Notice [SS] 2.3(a)OMERS PreambleParent PreambleParticipating Tag-Along Shares [SS] 2.4(b)Participating Tag-Along Stockholder [SS] 2.4(b)Proposed Sale [SS] 2.4(a)Proposed Sale Shares [SS] 2.4(a)Purchase Agreement PreambleRegister, registered, registration [SS] 5.1Registrable Security [SS] 5.1Registration Expenses [SS] 5.1Remaining Offered Shares [SS] 2.3(c)Requesting Demand Holder [SS] 5.3(a)Section 2.3 Participating Stockholder [SS] 2.3(b)Selling Stockholder(s) [SS] 2.3(a)Side-by-Side PreambleStockwell PreambleSubscription Agreement PreambleTag-Along Notice [SS] 2.4(a)Tag-Along Notice Period [SS] 2.4(b)Tag-Along Price Per Share [SS] 2.4(a)Tag-Along Shares [SS] 2.4(b)Tag-Along Stockholders [SS] 2.4(a)Third Investment Bank [SS] 5.2(b)Third Party Purchaser [SS] 2.3(a)Transfer [SS] 2.1Valid Business Reason [SS] 5.7 6 1.3. Interpretation. When a reference is made in this Agreement toSections, Schedules or Exhibits, such reference shall be to a Section, Scheduleor Exhibit of this Agreement, respectively, unless otherwise indicated. Thetable of contents and headings contained in this Agreement are for referencepurposes only and shall not affect in any way the meaning or interpretation ofthis Agreement. Whenever the words "include," "includes" or "including" are usedin this Agreement, they shall be deemed to be followed by the words "withoutlimitation". The words "hereof," "herein" and "hereunder" and words of similarimport when used in this Agreement shall refer to this Agreement as a whole andnot to any particular provision of this Agreement. The definitions contained inthis Agreement are applicable to the singular as well as the plural forms ofsuch terms. References to a person are also to its permitted successors andassigns. Whenever the context may require, any pronoun shall include thecorresponding masculine, feminine and neuter forms. ARTICLE II LIMITATIONS ON TRANSFER 2.1. General Restrictions on Transfer. (a) Each Stockholder agrees thatsuch Stockholder shall not, either directly or indirectly, sell, transfer,assign, mortgage, hypothecate, pledge, create a security interest in or lienupon, encumber, donate, contribute, place in trust, or otherwise voluntarily orinvoluntarily dispose of any Shares, or any economic or other interest therein(including by means of any participation or swap transaction) (any of theforegoing actions, to "Transfer" and, any sale, transfer, assignment, mortgage,hypothecation, pledge, security interest or lien, encumbrance, donation,contribution, placing in trust or other disposition, a "Transfer") except in atransaction in accordance with this Agreement. (b) Any attempt to Transfer any Shares that is not in compliance with this Agreement shall be null and void ab initio, and neither Parent nor any transfer agent shall give any effect in Parent's stock records to such attempted Transfer. (c) Notwithstanding any other provision of this Agreement, no Transfer of Shares may be made pursuant to this Agreement, unless: (i) such Transfer complies in all respects with all applicable federal, state and foreign securities laws, including, without limitation, if applicable, the Securities Act; (ii) except in the case of a Transfer in connection with a Public Offering or pursuant to Rule 144 or to Parent, the Transferee agrees in writing to be bound by the terms and conditions of this Agreement with respect to the Shares Transferred to such Transferee to the same extent the Transferor of such Shares is or was bound hereby; (iii) except with Parent's consent or in the case of a Transfer (A) in connection with a Public Offering, (B) pursuant to Rule 144 or (C) to Parent, a Permitted Transferee or a Cypress Member, such Transfer is not to any Person that, directly or indirectly (including through its Affiliates), competes with Parent or its subsidiaries; and (iv) if requested by Parent, in its sole discretion, an opinion of counsel to such Transferee shall be supplied to Parent, at such Transferee's expense, to the effect that such Transfer complies with all applicable federal, state and foreign securities laws. 7 2.2. Certain Permitted Transfers. (a) Subject to Sections 2.1(c) and, ifapplicable, 2.2(b), each Stockholder may Transfer Shares: (i) to a Permitted Transferee of such Stockholder; (ii) other than in the case of a Transfer by a Cypress Member or a Transfer permitted by clause (i) above, with the prior written consent of any Cypress Member (which consent (x) until the fifth anniversary of the date of this Agreement, may be withheld for any reason, or no reason, in the sole discretion of each Cypress Member and (y) on or after the fifth anniversary of the date of this Agreement, shall not be unreasonably withheld); and (iii) to the extent required by applicable law or regulation. (b) In the event that any Stockholder wishes to Transfer Shares in a transaction permitted by Section 2.2(a), such Stockholder shall give written notice to Parent and the other Stockholders of its intention to make such Transfer not less than 10 days prior to effecting such Transfer, which notice shall state the name and address of each Transferee to whom such Transfer is proposed and the number of Shares proposed to be Transferred to such Transferee. 2.3. Right of First Offer. (a) If any Stockholder (other than a CypressMember) (each a "Selling Stockholder" and, collectively, the "SellingStockholders") shall desire to sell Shares to any Person (other than (x) atransfer to Parent (or any of its subsidiaries), any Cypress Member or aPermitted Transferee of such Stockholder, (y) Transfers to the public pursuantto a Public Offering or Rule 144 and (z) Transfers as a Tag-Along Stockholderpursuant to Section 2.4 or as a Bring-Along Stockholder pursuant to Section 2.5)(a "Third Party Purchaser"), then such Selling Stockholder shall first offer theother Stockholders (for purpose of this Section 2.3, the "Offeree Stockholders")the right to purchase such Shares (the "Offered Shares") by sending writtennotice (the "Offering Notice") to Parent and the Offeree Stockholders, whichnotice shall (i) state the number of Offered Shares, (ii) state the proposedpurchase price per Share (the "Offer Price") and all other material terms andconditions of such sale and (iii) if applicable, be accompanied by any writtenoffer from the Third Party Purchaser. Upon delivery of the Offering Notice, theoffer made therein to the Offeree Stockholders shall be irrevocable unless anduntil the first offer rights provided for therein shall have been waived orshall have expired in accordance with this Agreement. (b) Each applicable Offeree Stockholder shall have the right, but not the obligation, to purchase at the Offer Price per Share (and otherwise upon the same economic terms and conditions as those set forth in the Offering Notice; it being understood that the phrase "economic terms and conditions", when used in this Agreement, shall include terms and conditions, applied on a pro rata basis, concerning amount, form and type of consideration and liquidity (including bring-along and tag-along terms and conditions), but shall exclude terms and conditions concerning management, directors, advisory, oversight or consulting) all but not less than all of its pro rata portion of the Offered Shares, in the proportion that the number of Shares owned by such Offeree Stockholder bears to the total number of Shares owned by all Offeree Stockholders. Such right of each Offeree Stockholder shall be exercisable by written notice to the Selling Stockholders with copies to Parent given within 20 Business Days after receipt of the Offering Notice (the "Notice Period"). Failure by the Offeree Stockholder to respond within the Notice Period shall be regarded as a rejection of the offer made pursuant to the Offering Notice. Each Offeree Stockholder who elects to purchase its full pro rata portion of the Offered Shares is referred to in this Section 2.3 as the "Section 2.3 Participating Stockholder." 8 (c) The Selling Stockholders shall, promptly after the end of the Notice Period, notify (the "Last-Chance Notice") all Section 2.3 Participating Stockholders whether the Offered Shares have been fully subscribed for, and, if not, the number of Offered Shares not subscribed for (the "Remaining Offered Shares"). Subject to the further provisions of this Section 2.3(c), each Section 2.3 Participating Stockholder shall have the right to purchase all, but not less than all, of the Remaining Offered Shares. The right of each Section 2.3 Participating Stockholder to purchase the Remaining Offered Shares shall be exercisable by written notice delivered to the Selling Stockholders, with a copy to Parent, given within five (5) Business Days after receipt of the Last-Chance Notice. If more than one Section 2.3 Participating Stockholder timely elects to exercise its right to purchase the Remaining Offered Shares, the right to purchase the Remaining Offered Shares shall (unless the Section 2.3 Participating Stockholders shall otherwise agree) be allocated pro rata among the Section 2.3 Participating Stockholders electing to purchase the Remaining Offered Shares, in the proportion that the number of Shares owned by each such Section 2.3 Participating Stockholder bears to the total number of Shares owned by all Section 2.3 Participating Stockholders that elect to purchase the Remaining Offered Shares. A failure of any Section 2.3 Participating Stockholder to exercise such right within such five (5) Business Day period shall be regarded as a waiver of its right to purchase the Remaining Offered Shares as provided herein. (d) Notwithstanding anything in this Section 2.3 to the contrary, the right of the Offeree Stockholders and/or the Section 2.3 Participating Stockholders to purchase the Offered Shares pursuant to this Section 2.3 shall be exercisable only if the Offeree Stockholders and/or the Section 2.3 Participating Stockholders collectively agree to purchase all, but not less than all, of the Offered Shares. (e) The closing of the purchase of Offered Shares by the Section 2.3 Participating Stockholders herein shall be held at the principal office of Parent at 11:00 a.m., local time, on the 60th day after the giving of the Last-Chance Notice, or at such other time and place as the parties to the transaction may agree; provided that, if the closing of the purchase requires any consent, waiver, approval, order, permit or authorization of, or declaration or filing with, or notification or report to, any governmental body, then the closing shall occur on the later of (x) the 30th day after such action and (y) the 60th day after the giving of the Last-Chance Notice, or at such other time and place as the parties to the transaction may agree. The sale of the Offered Shares to the Section 2.3 Participating Stockholders hereunder shall otherwise be on customary terms and conditions (but in any event in accordance with the terms of the Offering Notice); provided that the documents to be executed in connection with the sale of the Offered Shares shall not require any Selling Stockholder to (A) provide a non-competition covenant or restrict its ability to make investments in any business or (B) accept salary in lieu of any amount which is reasonably attributable to the purchase price. (f) If the Section 2.3 Participating Stockholders either (x) do not elect to purchase all of the Offered Shares pursuant to this Section 2.3 or (y) fail to diligently pursue any consent, waiver, approval, order, permit or authorization of, or declaration or filing with, or notification or report to, any governmental body necessary for the closing of the purchase to occur, then the Selling Stockholders may sell all, but not less than all of the Offered Shares not being purchased by Section 2.3 Participating Stockholders at a price per Share equal to or greater than the Offer Price and otherwise on terms and conditions that are in the aggregate not materially more favorable to the Third Party Purchaser than the terms and conditions set forth in the Offering Notice and the written offer, if any, delivered therewith pursuant to Section 2.3(a). Any such sale shall be bona fide and completed within 100 days of the Offering Notice (or, if none of the Offeree Stockholders is a Section 2.3 Participating Stockholder, then within 70 days of the Offering 9 Notice). In the event that such sale is not consummated within such applicable period for any reason, then the restrictions provided for herein shall again become effective, and no Transfer of such Off ...