REORGANIZATION AGREEMENT

This Reorganization Agreement (this “Agreement”), dated as of November 13, 2013, is entered into by and among Norcraft Companies, Inc., a Delaware corporation (“Norcraft”), Norcraft Holdings, L.P., a Delaware limited partnership (“Holdings”), Norcraft GP, LLC, a Delaware limited liability company (“Norcraft GP”), Norcraft Companies LLC, a Delaware limited liability company (“Norcraft LLC”), SKM Norcraft Corp., a Delaware corporation (“SKM Norcraft”), SKM Equity Fund III, L.P., a Delaware limited partnership (“SKM Equity”), SKM Investment Fund, a Delaware general partnership (“SKM Investment”), Auda Partners, L.P., a Delaware limited partnership (“Auda”), Auda Partners Beteiligungen GmbH & Co. KG, a German limited partnership (“APB”), Vesey Street Fund, L.P., a Delaware limited partnership (“Vesey SF”), Arthur Street Fund, L.P., a Delaware limited partnership (“Arthur SF”), Vesey Street Portfolio, L.P., a Cayman Islands limited partnership (“Vesey SP”), Arthur Street Portfolio, L.P., a Cayman Islands limited partnership (“Arthur SP”), Passage Portfolio, L.P., a Cayman Islands limited partnership (“Passage” and, together with SKM Equity, SKM Investment, Auda, APB, Vesey SF, Arthur SF, Vesey SP and Arthur SP, the “SKM Norcraft Owners”), Trimaran Cabinet Corp., a Delaware corporation (“Trimaran Cabinet”), Trimaran Fund II, L.L.C., a Delaware limited liability company (“Trimaran Fund”), Trimaran Capital, L.L.C., a Delaware limited liability company (“Trimaran Capital”), Trimaran Parallel Fund II, L.P., a Delaware limited partnership (“Trimaran Parallel”), CIBC Employee Private Equity Fund (Trimaran) Partners, a New York general partnership (“CIBC EPEF”), CIBC Capital Corporation, a Delware corporation (“CIBC CC” and, together with Trimaran Fund, Trimaran Capital, Trimaran Parallel and CIBC EPEF, the “Trimaran Cabinet Owners”), HMB Norcraft Corp., a Delaware corporation (“HMB Norcraft” and, together with SKM Norcraft and Trimaran Cabinet, the “Norcraft GP Owners”), Buller Norcraft Holdings LLC, a Delaware limited liability company (“Buller Norcraft”), MEB Norcraft LLC, a Delaware limited liability company (“MEB Buller”), the Persons listed on the signature pages hereto under the heading “Buller Norcraft Owners” (each, a “Buller Norcraft Owner”), the Person listed on the signature page hereto under the heading “MEB Buller Owner” (the “MEB Buller Owner” and, together with the Buller Norcraft Owners, the “Buller Owners”) and the Persons listed on the signature pages hereto under the heading “Management Parties” (each, a “Management Party”). The parties hereto are collectively referred to herein as the “Parties”.

WHEREAS, the Board of Directors of Norcraft (the “Board”) has determined to effect an underwritten initial public offering (the “IPO”) of shares of Norcraft’s Common Stock (as defined below) on the terms and subject to the conditions contained in the Underwriting Agreement (as defined below);

WHEREAS, the Parties desire to and hereby effect the Reorganization Transactions (as defined below) in contemplation of, in connection with and immediately prior to, the IPO; and

WHEREAS, in connection with the consummation of the Reorganization Transactions and the IPO, the applicable Parties hereto enter into the Reorganization Documents (as defined below).

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1.Definitions. Certain Defined Terms. As used herein, the following terms shall have the following meanings:

“Affiliate” when used with reference to another Person means any Person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, such other Person.  In addition, Affiliates of any Person that is an entity shall include all the directors, managers, officers and employees of such entity in their capacities as such.

“Agreement” has the meaning set forth in the Preamble hereof.

“APB” has the meaning set forth in the Preamble hereof.

“Arthur SF” has the meaning set forth in the Preamble hereof.

“Arthur SP” has the meaning set forth in the Preamble hereof.

“Auda” has the meaning set forth in the Preamble hereof.

“Board” has the meaning set forth in the Recitals hereof.

“Buller Norcraft” has the meaning set forth in the Preamble hereof.

“Buller Norcraft and MEB Buller Liquidation” has the meaning set forth in Section 4.d. hereof.

“Buller Norcraft Indemnitees” has the meaning set forth in Section 9.d. hereof.

“Buller Norcraft Owner” has the meaning set forth in the Preamble hereof.

“Buller Norcraft Owners Contribution” has the meaning set forth in Section 4.b.ii. hereof.

“Buller Norcraft Pre-Closing Tax Indemnity” has the meaning set forth in Section 9.d.iii. hereof.

“Buller Norcraft Set-Off Rights” has the meaning set forth in Section 9.d.iv. hereof.

“Buller Owner Contribution” has the meaning set forth in Section 4.b.iii. hereof.

“Buller Owners” has the meaning set forth in the Preamble hereof.

“CIBC CC” has the meaning set forth in the Preamble hereof.

“CIBC EPEF” has the meaning set forth in the Preamble hereof.

“Claim” has the meaning set forth in Section 9.j. hereof.

“Claim Amount” has the meaning set forth in Section 9.j. hereof.

“Claim Notice” has the meaning set forth in Section 9.j. hereof.

“Claiming Party” has the meaning set forth in Section 9.j. hereof.

“Class A Units” means the Class A Units of Holdings as defined in the Old Holdings LP Agreement.

“Class B Units” means the Class B Units of Holdings as defined in the Old Holdings LP Agreement.

“Class C Units” means the Class C Units of Holdings as defined in the Old Holdings LP Agreement.

“Class D Units” means the Class D Units of Holdings as defined in the Old Holdings LP Agreement.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” shall mean Common Stock, par value $0.01 per share, of Norcraft.

“Common Units” has the meaning set forth in Section 4.b.i. hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Agreement” has the meaning set forth in Section 5.b. hereof.

“HMB Norcraft” has the meaning set forth in the Preamble hereof.

“Holdings” has the meaning set forth in the Preamble hereof.

“Holdings Contributions” has the meaning set forth in Section 4.b.v. hereof.

“Holdings GP Investment” has the meaning set forth in Section 4.c. hereof.

“Indemnifying Party” has the meaning set forth in Section 9.j.i. hereof.

“IPO” has the meaning set forth in the Recitals hereof.

“IPO Closing” means the initial closing of the sale of the shares of Common Stock in the IPO (without giving effect to any exercise of the underwriters’ over-allotment option).

“IPO Effective Time” means the date and time on which the Registration Statement becomes effective.

“LLC Agreement” has the meaning set forth in Section 4.a. hereof.

“Losses” means any and all deficiencies, judgments, settlements, actions, demands, claims, awards, assessments, liabilities, losses, Taxes, damages (whether direct, indirect, incidental or consequential), interest, fines, penalties, expenses and costs, including reasonable attorneys’ fees.

“Management Party” has the meaning set forth in the Preamble hereof.

“Management Party Contribution” has the meaning set forth in Section 4.b.v. hereof.

“Management Party Indemnitee” has the meaning set forth in Section 9.g.iii. hereof.

“Management Party Set-Off Right” has the meaning set forth in Section 9.g.iii. hereof.

“MEB Buller” has the meaning set forth in the Preamble hereof.

“MEB Buller Indemnitees” has the meaning set forth in Section 9.c. hereof.

“MEB Buller Owner” has the meaning set forth in the Preamble hereof.

“MEB Buller Owner Contribution” has the meaning set forth in Section 4.b.i. hereof.

“New Holdings LP Agreement” has the meaning set forth in Section 4.e. hereof.

“Norcraft” has the meaning set forth in the Preamble hereof.

“Norcraft Charter” has the meaning set forth in Section 3.a. hereof.

“Norcraft Contribution” has the meaning set forth in Section 4.e. hereof.

“Norcraft GP” has the meaning set forth in the Preamble hereof.

“Norcraft GP Owners” has the meaning set forth in the Preamble hereof.

“Norcraft GP Purchase” has the meaning set forth in Section 4.b.vi. hereof.

“Norcraft Group Indemnitees” has the meaning set forth in Section 9.c.iii. hereof.

“Norcraft Indemnitees” has the meaning set forth in Section 9.a. hereof.

“Norcraft LLC” has the meaning set forth in the Preamble hereof.

“Norcraft LLC Certificate” has the meaning set forth in Section 3.b. hereof.

“Norcraft LLC Indemnitees” has the meaning set forth in Section 9.b. hereof.

“Norcraft Registration Rights Agreement” has the meaning set forth in Section 5.a. hereof.

“Old Holdings LP Agreement” means the Third Amended and Restated Agreement of Limited Partnership of Holdings, dated June 25, 2007.

“Passage” has the meaning set forth in the Preamble hereof.

“Parties” has the meaning set forth in the Preamble hereof.

“Person” means an individual, a partnership, a joint venture, an association, a corporation, a trust, an estate, a limited liability company, a limited liability partnership, an unincorporated entity of any kind, a governmental entity or any other legal entity.

“Pre-Closing Tax Period” has the meaning set forth in Section 9.c.iii. hereof.

“Pricing” means such date and time as the Board or the pricing committee thereof determines.

“Registration Statement” means the Exchange Act registration statement filed by Norcraft on Form 8-A with the SEC to register the Common Stock.

“Reorganization Documents” means each of the documents attached as an exhibit hereto and all other agreements and documents entered into in connection with the Reorganization Transactions.

“Representatives” means, with respect to any Person, such Person’s officers, directors, principals, employees, counsel, advisors, auditors, agents, consultants, bankers and other representatives.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“SKM Contribution” has the meaning set forth in Section 4.b.iii. hereof.

“SKM Equity” has the meaning set forth in the Preamble hereof.

“SKM Investment” has the meaning set forth in the Preamble hereof.

“SKM Norcraft” has the meaning set forth in the Preamble hereof.

“SKM Norcraft Indemnitees” has the meaning set forth in Section 9.e. hereof.

“SKM Norcraft Owners” has the meaning set forth in the Preamble hereof.

“SKM Norcraft Pre-Closing Tax Indemnity” has the meaning set forth in Section 9.e.iii. hereof.

“SKM Norcraft Set-Off Right” has the meaning set forth in Section 9.e.vi. hereof.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall control the management of any such limited liability company, partnership, association or other business entity. 

“Survival Period” has the meaning set forth in Section 8.o. hereof.

“Tax” or “Taxes” means any and all federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, escheat obligation, alternative or add-on minimum, estimated, or other tax of any kind or any charge of any kind in the nature of (or similar to) taxes whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

“Tax Return” means any Tax-related return, declaration, election, report, claim for refund or information return or statement filed or required to be filed with a Taxing authority, including any schedule or attachment thereto, and including any amendment thereof.

“Third Party Claim” has the meaning set forth in Section 9.j.v.(1) hereof.

“Trimaran Cabinet” has the meaning set forth in the Preamble hereof.

“Trimaran Cabinet Owners” has the meaning set forth in the Preamble hereof.

“Trimaran Cabinet Indemnitees” has the meaning set forth in Section 9.f. hereof.

“Trimaran Cabinet Pre-Closing Tax Indemnity” has the meaning set forth in Section 9.f.iii. hereof.

“Trimaran Cabinet Set-Off Right” has the meaning set forth in Section 9.f.vi. hereof.

“Trimaran Capital” has the meaning set forth in the Preamble hereof.

“Trimaran Contribution” has the meaning set forth in Section 4.b.iv. hereof.

“Trimaran Fund” has the meaning set forth in the Preamble hereof.

“Trimaran Parallel” has the meaning set forth in the Preamble hereof.

“Underwriting Agreement” means the underwriting agreement, dated as of the day prior to the IPO Effective Time, by and among Norcraft and the underwriters of the IPO.

“Vesey SF” has the meaning set forth in the Preamble hereof.

“Vesey SP” has the meaning set forth in the Preamble hereof.

are to such agreement, contract or schedule as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; and

3.Actions Previously Taken. The applicable Parties hereto acknowledge they have taken the actions set forth below (or caused such actions to take place):

4.Reorganization. Subject to the terms and conditions hereinafter set forth, and on the basis of and in reliance upon the representations, warranties, covenants and agreements set forth herein, the parties hereto hereby take the following actions described in Section 4 in the order in which they appear below (collectively, the “Reorganization Transactions”), which the Parties agree occur on the date of and immediately prior to the IPO Closing and the execution of the documents described in Section 5(a) and Section 5(b) hereof. The parties hereto agree that the IPO Closing will occur on the date hereof at approximately 9:00am EDT, but only after the satisfaction or waiver of all of the closing conditions enumerated in the Underwriting Agreement.

“MEB Buller Owner Contribution”);

hereby files a certificate of cancellation of the certificate of formation for each of Buller Norcraft and MEB Buller with the Delaware Secretary of State (the “Buller Norcraft and MEB Buller Liquidation”).

7.No Liabilities in Event of Termination; Certain Covenants. In the event that Norcraft determines in writing to abandon the IPO prior to the occurrence of each of the events described in Sections 4 and 5, (i) this Agreement shall automatically terminate and be of no further force or effect except for this Section 7 and Sections 11(c), (f), (g), (j) and (k) and (ii) there shall be no liability on the part of any of the Parties hereto, except that such termination shall not preclude any Party from pursuing judicial remedies for damages and/or other relief as a result of the breach by the other Parties of any representation, warranty, covenant or agreement contained herein prior to such termination. In the event that Norcraft determines to abandon the IPO after the occurrence of some or all of the events described in Sections 4 and 5, the Parties agree, as applicable, (a) to amend the applicable Reorganization Documents so that the governance, transfer restrictions, liquidity rights and other provisions therein with respect to Holdings and each of their respective direct and indirect subsidiaries correspond in the aggregate in all substantive respects with the provisions contained in the Old Holdings LP Agreement and (b) to the extent possible and without material adverse effect on any Party, to rescind the other transfers, exchanges and other actions described in Section 4 and consummated prior to such abandonment.

8.Representations and Warranties.

warrants to the SKM Norcraft Owners and the Trimaran Cabinet Owners as follows as of the date of this Agreement:

or allow any such actions to be taken (and will not enter into a binding obligation to do so) prior to the one-year anniversary of the IPO.

Buller is not a party to any contractual obligation relating to Tax sharing or Tax allocation and (f) MEB Buller does not have any liability for the Taxes of any other Person under law, as a transferee or successor, by contract or otherwise.

than (i) the assets listed as owned by Buller Norcraft on Schedule III hereto and (ii) cash and cash equivalents. Buller Norcraft was organized on October 20, 2003 and since such date has never conducted any operations other than (A) holding the assets listed as owned by Buller Norcraft on Schedule III hereto, (B) holding cash and cash equivalents and (C) ministerial and administrative acts necessary to conducting the operations listed in the foregoing clauses (A) and (B).

Norcraft is or may be subject to taxation by that jurisdiction, (e) SKM Norcraft is not a party to any contractual obligation relating to Tax sharing or Tax allocation and (f) SKM Norcraft does not have any liability for the Taxes of any other Person under law, as a transferee or successor, by contract or otherwise.

obligation to do so) prior to the one-year anniversary of the IPO.

Period”). In the event any Claim Notice is delivered within the Survival Period that asserts a breach of a representation or warranty contained in this Agreement, such representation or warranty shall survive with respect to the applicable underlying Claim until such time as such Claim is finally resolved.

The MEB Buller Owner’s share of the indemnification obligations relating to clauses i. and ii. of this Section 9.c. (insofar as they relate to breaches by Norcraft GP of any representation, warranty, covenant or agreement) shall equal HMB Norcraft’s percentage ownership of Norcraft GP as of immediately prior to the Norcraft GP Purchase.

the Buller Norcraft Owners shall, on a proportionate basis based on such Buller Norcraft Owner’s percentage ownership of Buller Norcraft as of immediately prior to the Buller Owner Contribution, also indemnify and hold harmless the Norcraft Group Indemnitees from and against and in respect of any and all Losses resulting from, arising out of, relating to, or imposed upon or incurred by any Norcraft Group Indemnitee by reason of (a) the Transfer Taxes described in Section 10.j.i., (b) any Taxes of Buller Norcraft for the Pre-Closing Tax Period, including, for clarity, any Taxes arising out of, relating to, or imposed upon or incurred by any Norcraft Group Indemnitee as a result of the Buller Norcraft Contribution or the Buller Norcraft and MEB Buller Liquidation, (c) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which Buller Norcraft is or was a member on or prior to the date hereof; and (d) any and all Taxes of any Person imposed on Buller Norcraft for any period as a transferee or successor in respect of a transaction occurring on or before the date of this Agreement (the “Buller Norcraft Pre-Closing Tax Indemnity”).

The amount of any indemnification obligation by the Buller Norcraft Owners to Norcraft and its Subsidiaries shall be reduced by the amount of any cash on hand in Buller Norcraft as of the Buller Norcraft Owner Contribution and any Tax prepayments or Tax refunds accrued by Buller Norcraft (and which such refunds are subsequently actually realized as a result of the applicable determination date), in each case as of the date of this Agreement.

available to be subject to the Buller Norcraft Set-Off Right over the 24-month period following the date on which the claim for indemnification was made, then the Norcraft Group Indemnitee may pursue indemnification against the Buller Norcraft Owners directly.

The amount of any indemnification obligation by the SKM Norcraft Owners

to Norcraft and its Subsidiaries shall be reduced by the amount of any cash on hand in SKM Norcraft as of immediately prior to the Norcraft Contribution and any Tax prepayments or Tax refunds accrued by SKM Norcraft (and which such refunds are subsequently actually realized as of the applicable determination date), in each case as of immediately prior to the Norcraft Contribution.

Losses resulting from, arising out of, relating to, or imposed upon or incurred by any Trimaran Cabinet Indemnitee by reason of:

The amount of any indemnification obligation by the Trimaran Cabinet Owners to Norcraft and its Subsidiaries shall be reduced by the amount of any cash on hand in Trimaran Cabinet as of immediately prior to the Norcraft Contribution and any Tax prepayments or Tax refunds accrued by Trimaran Cabinet (and which such refunds are subsequently actually realized as of the applicable determination date), in each case as of immediately prior to the Norcraft Contribution.

and (y) to the Trimaran Cabinet Pre-Closing Tax Indemnity shall equal such Trimaran Cabinet Owner’s percentage ownership of Trimaran Cabinet as of immediately prior to the Norcraft Contribution.

objection to the Claiming Party within twenty (20) business days after receipt by the Indemnifying Party of such Claim Notice expressing such objection and explaining in reasonable detail and in good faith the basis therefor. Following receipt by the Claiming Party of the Indemnifying Party’s written objection, if any, the Claiming Party and the Indemnifying Party shall promptly, and within twenty (20) business days, meet to agree on the rights of the respective parties with respect to each Indemnification Claim that is the subject of such written objection. If the Parties should so agree, (i) a memorandum setting forth such agreement shall be prepared and executed by the Claiming Party and the Indemnifying Party, and (ii) with respect to any Claim, as promptly as practicable and within five (5) business days following execution of such memorandum, subject to this Section 9.j. and the indemnification limitations described elsewhere in this Agreement, the Indemnifying Party shall pay to the Claiming Party in cash the aggregate dollar amount of Losses payable to such Claiming Party. In the event that the Indemnifying and Claiming Parties do not prepare and sign such a memorandum or such memorandum does not address in full the written objections timely delivered, within twenty (20) business days of receipt by the Claiming Party from the Indemnifying Party of the written objection, then the Claiming Party may resolve such dispute in accordance with Section 11.f. (Governing Law; Jurisdiction; Waiver of Jury Trial.). In no event shall failure to respond to a Claim Notice result in a loss of the Indemnifying Party’s rights hereunder.

“Third Party Claim”), that may reasonably be expected to result in a claim for indemnification by the Claiming Party against the Indemnifying Party, such Party shall deliver a Claim Notice within thirty (30) calendar days of such receipt to the Indemnifying Party; provided that no delay by the Claiming Party in notifying the Indemnifying Party will relieve the Indemnifying Party of any liability hereunder, unless the Indemnifying Party is actually and materially prejudiced by the Claiming Party’s failure to timely provide such notice.

has given notice of the Third Party Claim, or otherwise at any time fails to conduct the defense of the Third Party Claim actively and diligently, the Claiming Party may defend against (and the Indemnifying Party shall be entitled to participate in the defense of) the Third Party Claim, but the Claiming Party will not consent to the entry of any judgment or enter into any compromise or settlement with respect to a Third Party Claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed. If such notice and evidence is given on a timely basis and the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently but any of the other conditions in clause (1) of this Section 9.j.v.(4) is or becomes unsatisfied, the Claiming Party may defend against the Third Party Claim, but the Claiming Party will not consent to the entry of any judgment or enter into any compromise or settlement with respect to a Third Party Claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed. If the Claiming Party conducts the defense of the Third Party Claim pursuant to this Section 9.j.v.(4), the Indemnifying Party shall remain responsible for any and all other Losses that the Claiming Party may incur or suffer resulting from, arising out of, relating to, in the nature of or caused by the Third Party Claim to the fullest extent provided in this Section 9.j.v.(4).

including the right to control the defense of certain Third Party Claims and the right to consent to the settlement or certain Claims, in each case subject to the limitations described in such clauses. Further, SKM Norcraft Owner shall have the right to jointly defend against and control any Tax-related action, suit, proceeding, audit, investigation, claim or examination which could give rise to an adjustment to an item of taxable income, gain, loss, deduction or credit with respect to a period (or portion thereof) ending on or prior to the date hereof (subject to the limitations described in Section 9.j.v.(3) hereof).

closing of the books as of the close of business on the date hereof (and for such purposes the taxable period of any entity classified as a partnership, “controlled foreign corporation”, or disregarded entity for U.S. federal income tax purposes in which such Person or any of its subsidiaries holds a beneficial interest (including any subsidiary so classified, as applicable) will be deemed to terminate at such time), and, with respect to SKM Norcraft and Trimaran Cabinet to the extent permitted by law, in a manner consistent with Treasury Regulations Section 1.1502-76(b)(2)(vi). The amount of Taxes of such Person other than Taxes of such Person described in the preceding sentence for a Straddle Period which relate to the Pre-Closing Tax Period will be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the portion of the taxable period ending on the date hereof and the denominator of which is the number of days in such Straddle Period.

(30) days prior to the due date for the filing of such a Norcraft Return, Norcraft shall provide a copy of such Norcraft Return to the SKM Norcraft Owner Representative for review and approval (which approval shall not be unreasonably withheld, conditioned or delayed).

not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms.