Exhibit 7
SECURITYHOLDERS' AGREEMENT, dated as of _________ ___, 2001 (this
"Agreement"), among (i) CB Xxxxxxx Xxxxx Services, a Delaware corporation
---------
("CBRE") and XXXX XX Holding Corp. (the "Company"), (ii) RCBA Strategic
---- -------
Partners, L.P., a Delaware limited partnership (together with its successors,
"XXXX"), (iii) FS Equity Partners III, L.P., a Delaware limited partnership
----
("FSEP"), and FS Equity Partners International, L.P., a Delaware limited
----
partnership ("FSEP International," and together with FSEP and their respective
------------------
successors, the "FS Entities"), (iv) DLJ Investment Funding, Inc. ("DLJ"), (v)
----------- ---
The Xxxx Holding Company, a California corporation (together with its
successors, "Xxxx"), Xxxxxxxx X. Xxxxx ("Xxxxx", and together with Xxxx, the
---- -----
"Other Non-Management Investors"), and (vi) the individuals identified on the
------------------------------
signature pages hereto as "Management Investors" (together, the "Management
----------
Investors"; collectively with the FS Entities, DLJ and the Other Non-Management
---------
Investors, the "Non-XXXX Investors").
------------------
RECITALS:
A. CBRE, the Company and XXXX XX Corp., a Delaware Corporation
("Newco"), are parties to an Agreement and Plan of Merger, dated as of February
-----
23, 2001 (the "Merger Agreement"), pursuant to which, among other things, Newco
----------------
merged with and into CBRE on the date hereof (the "Merger") and CBRE became a
------
wholly-owned subsidiary of the Company;
B. As a result of the Merger, on the date hereof, XXXX is the largest
holder of the outstanding shares of common stock, par value $0.01 per share, of
the Company (the "Common Stock") and the Non-XXXX Investors also hold
------------
outstanding shares of the Common Stock; and
C. The parties hereto wish to provide for certain matters relating to
their respective holdings of the Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
I INTRODUCTORY MATTERS
1.1. Defined Terms.
------------------
The following terms have the following meanings when used herein with
initial capital letters:
"Advisory Services" has the meaning set forth in Section 4.4.
-----------------
"Affiliate" means, with respect to any Person, any Person that
---------
directly or indirectly controls, is controlled by or is under common
control with, such Person. As used in this definition of "Affiliate" and
the definition of "Subsidiary," "control" (including, with correlative
-------
meanings, "controlled by" and "under common control with") shall mean the
------------- -------------------------
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies, whether through the ownership of
securities or partnership or other ownership interests, by contract or
otherwise. Notwithstanding
anything to the contrary stated herein, the Company shall not be considered
an Affiliate of any Securityholder.
"Agreement" means this Agreement, as the same may be amended,
---------
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"Approved Sale" has the meaning set forth in Section 2.5(c).
-------------
"Assumption Agreement" means an agreement in the form attached hereto
--------------------
as Exhibit A whereby a transferee of Restricted Securities becomes a party
to, and agrees to be bound by, the terms of this Agreement in the manner
set forth in Section 6.5 hereto.
"XXXX" has the meaning set forth in the Preamble.
----
"XXXX Directors" has the meaning set forth in Section 4.1(c)(i).
--------------
"XXXX Holder" means (i) XXXX and (ii) any Person to whom XXXX
-----------
Transfers Registrable Securities (but only to the extent of the Registrable
Securities acquired from XXXX) and, in the case of clause (ii), which
Person becomes bound by the provisions of this Agreement in the manner set
forth in Section 6.5 hereto.
"XXXX Sale" has the meaning set forth in Section 2.4(a).
---------
"Board" means the Board of Directors of the Company.
-----
"Bylaws" means the Bylaws of the Company as of the Closing, as the
------
same may be amended from time to time.
"Cause" has the meaning set forth in Section 4.1(j).
-----
"CBRE" has the meaning set forth in the Preamble.
----
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company as of the Closing, as the same may be amended from time to
time.
"Claim Notice" has the meaning set forth in Section 5.4(b).
------------
"Closing" means the Closing of the Merger.
-------
"Common Stock" has the meaning set forth in the Recitals.
------------
"Company" has the meaning set forth in the Preamble.
-------
"Consolidated EBITDA" means, for any period, [the consolidated net
-------------------
income of the Company and its subsidiaries for such period as set forth in
the consolidated financial statements of the Company, plus the following of
the Company and its subsidiaries to the extent deducted in calculating such
consolidated net income: (i) consolidated interest expense, (ii)
consolidated income tax expense, (iii) consolidated depreciation expense
and (iv) consolidated amortization expenses]. [Note: To the extent that the
senior debt
2
financing contains a different definition of Consolidated EBITDA, this
definition will be conformed to that used in the senior debt financing.]
"Contribution Agreement" means that certain Contribution and Voting
----------------------
Agreement, dated as of February 23, 2001, among XXXX XX Holding Corp., XXXX
XX Corp., RCBA Strategic Partners, L.P., FS Equity Partners III, L.P., FS
Equity Partners International, L.P., Xxxxx, White and the other investors
who are signatories thereto.
"DLJ Holder" means (i) DLJ and (ii) any Person to whom DLJ Transfers
----------
Registrable Securities (but only to the extent of the Registrable
Securities acquired from DLJ) and, in the case of clause (ii), which Person
becomes bound by the provisions of this Agreement as a DLJ Party in the
manner set forth in Section 6.5 hereto.
"DLJ Parties" means (i) DLJ and (ii) any Person to whom DLJ Transfers
-----------
Restricted Securities and, in the case of clause (ii), which Person becomes
bound by the provisions of this Agreement in the manner set forth in
Section 6.5 hereto.
"Drag-Along Notice" has the meaning set forth in Section 2.5(b).
-----------------
"Dragging Party" has the meaning set forth in Section 2.5(a).
--------------
"Equity Securities" means (i) any Common Stock or other equity
-----------------
security of the Company, (ii) any security convertible, with or without
consideration, into Common Stock or any other equity security of the
Company (including any option or other right to purchase or acquire such a
convertible security) and (iii) any option, warrant or other right to
purchase or acquire Common Stock or any other equity security of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
"Fair Market Value" means (i) with respect to cash consideration, the
-----------------
total amount of such cash consideration in United States dollars, (ii) with
respect to non-cash consideration consisting of publicly-traded securities,
the average daily closing sales price of such securities for the ten
consecutive trading days preceding the date of Fair Market Value of such
securities is required to be determined hereunder (with the closing price
for each day being the last reported sales price regular way or, in case no
such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the principal
national securities exchange on which such securities are listed and
admitted to trading, or, if not listed and admitted to trading on any such
exchange on the NASDAQ National Market System, or if not quoted on the
NASDAQ National Market System, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for that
purpose) and (iii) with respect to non-cash consideration not consisting of
publicly-traded securities, such amount as is determined to be the fair
market value of the non-cash consideration as of the date such
3
Fair Market Value is required to be determined hereunder as determined in
good faith by the Board.
For the purposes of Section 2.2(a), if the Transferring Securityholder
or XXXX disputes in good faith the determination by the Board pursuant to
the above clause (iii) of the Fair Market Value of the non-cash
consideration to be paid for the Transfer Securities, then the Transferring
Securityholder or XXXX, as applicable, may require that an investment bank
selected by the Company and reasonably acceptable to the Transferring
Securityholder and XXXX determine such Fair Market Value for the purposes
of clause (iii).
For the purposes of Section 4.7(a)(ii), if the FS Director believes in
good faith that the Fair Market Value, determined pursuant to the above
clause (iii), of the consideration to be received for the assets of the
Company or its Subsidiaries to be sold under that Section exceeds $75
million, then the FS Director may require that such Fair Market Value be
determined by an independent investment bank selected by the Company and
reasonably acceptable to the FS Director.
The Company shall pay the fees and expenses of the investment bank in
making any Fair Market Value determination; provided, however that in the
-------- -------
case of the second paragraph of this definition of "Fair Market Value", if
the Transferring Securityholder does not have a good faith belief that the
Fair Market Value of the non-cash consideration to be paid for the Transfer
Securities, as determined pursuant to the above clause (iii), is greater
than or equal to $5 million, then the fees and expenses of the investment
bank in making any Fair Market Value determination at the request of such
Transferring Securityholder under such circumstances shall be paid by such
Transferring Securityholder.
"FS Director" has the meaning set forth in Section 4.1(c)(ii).
-----------
"FS Entities" has the meaning set forth in the Preamble.
-----------
"FS Holder" means (i) each of the FS Entities and (ii) any Person to
---------
whom either of the FS Entities Transfers Registrable Securities or
Restricted Securities (but only to the extent of the Registrable Securities
or Restricted Securities acquired from such FS Entity) and, in the case of
clause (ii), which Person becomes bound by the provisions of this Agreement
as a FS Party in the manner set forth in Section 6.5 hereto.
"FS Parties" means (i) each of the FS Entities and (ii) any Person to
----------
whom either of the FS Entities Transfers Restricted Securities and, in the
case of clause (ii), which Person becomes bound by the provisions of this
Agreement in the manner set forth in Section 6.5 hereto.
"FS Warrants" means (i) the warrants to acquire Common Stock acquired
-----------
by the FS Entities pursuant to the Contribution Agreement and (ii) any
shares of Common Stock received upon exercise of such warrants.
4
"Holder" means any Person owning of record Registrable Securities who
------
(i) is a party to this Agreement on the date hereof or (ii) subsequently
agrees in writing to be bound by the provisions of this Agreement in
accordance with the terms of Section 6.5 of this Agreement.
"Indebtedness" means any indebtedness for borrowed money.
------------
"Indemnified Party" has the meaning set forth in Section 5.4(b).
-----------------
"Initiating Holder" means, with respect to any registration effected
-----------------
pursuant to Section 3.1, (i) the XXXX Holders in the event that the Holder
or Holders from whom a notice is received pursuant to Section 3.1(a) that
initiates such registration is a XXXX Holder, (ii) the FS Holders in the
event that the Holder or Holders from whom a notice is received pursuant to
Section 3.1(a) that initiates such registration is a FS Holder, and (iii)
the DLJ Holders in the event that the Holder or Holders from whom a notice
is received pursuant to Section 3.1(a) that initiates such registration is
a DLJ Holder.
"IPO" or "Initial Public Offering" means the completion of an
--- -----------------------
underwritten Public Offering of Common Stock pursuant to which the Company
becomes listed on a national securities exchange or on the NASDAQ Stock
Market.
"Issuance" has the meaning set forth in Section 2.6(a).
--------
"Legend" has the meaning set forth in Section 2.1(d).
------
"Losses" has the meaning set forth in Section 3.9(d).
------
"Losses and Expenses" has the meaning set forth in Section 5.4(a).
-------------------
"Management Investors" has the meaning set forth in the Preamble.
--------------------
"Management Parties" means (i) each of the Management Investors and
------------------
(ii) any Person to whom any of the Management Investors Transfers
Restricted Securities and, in the case of clause (ii), which Person becomes
bound by the provisions of this Agreement in the manner set forth in
Section 6.5 hereto.
"Material Securityholder" means XXXX, each of the FS Entities, DLJ,
-----------------------
Xxxxx, Xxxx and any Securityholder who (as determined on a particular date)
beneficially owns, together with its Affiliates, greater than 10% of the
total outstanding Common Stock as of such date.
"Merger" has the meaning set forth in the Recitals.
------
"Merger Agreement" has the meaning set forth in the Recitals.
----------------
"Newco" has the meaning set forth in the Recitals.
-----
"Non-XXXX Investors" has the meaning set forth in the Preamble.
------------------
5
"Non-XXXX Parties" means the FS Parties, the DLJ Parties, the Other
----------------
Non-Management Parties and the Management Parties, collectively.
"Notes" means the Company's 16.0% Senior Notes due ______ ___, 2011.
-----
"Notice Period" has the meaning set forth in Section 5.4(b).
-------------
"Observer" has the meaning set forth in Section 4.3(a).
--------
"Offer Price" has the meaning set forth in Section 2.2(a).
-----------
"Offer Notice" has the meaning set forth in Section 2.2(a).
------------
"Other Holder" means any Holder other than a XXXX Holder, a FS Holder
------------
or a DLJ Holder.
"Other Non-Management Investors" has the meaning set forth in the
------------------------------
Preamble.
"Other Non-Management Parties" means (i) each of the Other Non-
----------------------------
Management Investors and (ii) any Person to whom either of the Other Non-
Management Investors Transfers Restricted Securities and, in the case of
clause (ii), which Person becomes bound by the provisions of this Agreement
in the manner set forth in Section 6.5 hereto.
"Ownership" means, with respect to any Person, all matters related to
---------
such Person's and such Person's Affiliates' (i) beneficial ownership of
Restricted Securities, (ii) due authorization of a Transfer of such
Restricted Securities, (iii) power to Transfer such Restricted Securities,
and (iv) non-violation of agreements, laws, etc. relating to such Transfer
of such Restricted Securities.
"Permitted Third Party Transfer Date" means the three year anniversary
-----------------------------------
of the date hereof.
"Permitted Transferees" means any Person to whom Restricted Securities
---------------------
are Transferred by a Non-XXXX Party in a Transfer in accordance with
Section 2.3 and not in violation of this Agreement and who is required to,
and does, enter into an Assumption Agreement, and includes any Person to
whom a Permitted Transferee of a Non-XXXX Party (or a Permitted Transferee
of a Permitted Transferee) so further Transfers Restricted Securities and
who is required to, and does, execute and deliver to the Company and XXXX
an Assumption Agreement.
"Person" means any individual, corporation, limited liability company,
------
partnership, trust, joint stock company, business trust, unincorporated
association, joint venture, governmental authority or other legal entity of
any nature whatsoever.
"Proposed Transferee" has the meaning set forth in Section 2.4(a).
-------------------
"Public Offering" means the sale of shares of any class of the Common
---------------
Stock to the public pursuant to an effective registration statement (other
than a registration
6
statement on Form S-4 or S-8 or any similar or successor form) filed under
the Securities Act in connection with an underwritten offering.
"Purchase Agreement" means that certain Purchase Agreement, dated as
------------------
of the date hereof, between the Company and DLJ, pursuant to which, among
other things, the Company issued and sold to DLJ, and DLJ purchased from
the Company, the Notes.
"Purchase Price" means the Fair Market Value of the consideration paid
--------------
by the Company or any of its Subsidiaries.
"Qualified Purchaser" means any Person to whom any Transferring
-------------------
Securityholder wishes to sell Restricted Securities pursuant to Section
2.2; provided that such Person (i) shall be acceptable to XXXX (such
--------
acceptance to be evidence in writing and to not be unreasonably withheld;
it is understood that, if the proposed Qualified Purchaser is a nationally-
recognized private equity sponsor or institutional equity investor, such
consent will not be withheld unless XXXX'x decision to withhold consent
results from XXXX'x or any of its Affiliate's direct experience with such
proposed Qualified Purchaser in connection with another actual or proposed
transaction) and (ii) execute and deliver to the Company and XXXX an
Assumption Agreement.
"Registrable Securities" means any shares of Common Stock held by the
----------------------
Securityholders, including as a result of the exercise of options or
warrants to acquire Common Stock. For purposes of this Agreement, any
Registrable Securities held by any Person will cease to be Registrable
Securities when (A) a registration statement covering such Registrable
Securities has been declared effective and such Registrable Securities have
been disposed of pursuant to such effective registration statement, (B) the
registration rights of the holder of such Registrable Securities have
terminated pursuant to Section 3.7 hereto, or (C) such Registrable
Securities cease to be outstanding.
"Registration Expenses" means all expenses incident to performance of
---------------------
or compliance with Sections 3.1 and 3.2 hereof, including, without
limitation, all registration and filing fees, printing messenger and
delivery expenses, fees and expenses of listing the Registrable Securities
on any securities exchange, rating agency fees, fees and disbursements of
counsel for the Company and of its independent public accountants,
reasonable fees and disbursements of a single special counsel for the
Holders selected in accordance with Section 3.5, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration (including "cold comfort" letters), fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities
(including liability insurance but excluding Selling Expenses), and other
reasonable out-of-pocket expenses of Holders (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Related Party" has the meaning set forth in Section 5.3.
-------------
"Relevant Period" has the meaning set forth in Section 3.1(c)(iv).
---------------
7
"Restricted Period" means the period beginning on the date hereof and
-----------------
ending on the earlier of (i) the ten year anniversary of the date hereof
and (ii) the date of the Initial Public Offering.
"Restricted Securities" has the meaning set forth in Section 2.1(a).
---------------------
"Right" has the meaning set forth in Section 2.6(a).
-----
"Rule 144" means Rule 144 of the Securities Act.
--------
"SEC" or "Commission" means the Securities and Exchange Commission.
--- ----------
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"Securityholder" means each of the holders of Common Stock or the FS
--------------
Warrants who are parties to this Agreement or an Assumption Agreement.
"Selling Expenses" means all underwriting discounts and selling
----------------
commissions and transfer taxes applicable to the sale.
"Subsidiary" means, with respect to any Person, any other Person (i)
----------
of which (or in which) such first Person beneficially owns, directly or
indirectly, 50% or more of the outstanding capital stock or other equity
interests having ordinary voting power to elect the Board of Directors or
any equivalent body of such other Person or (ii) of which such first Person
or its Subsidiary is a general partner, managing member or an equivalent.
"Tagging Securityholder" has the meaning set forth in Section 2.4(a).
----------------------
"Third Party" has the meaning set forth in Section 2.4(a).
-----------
"Transfer" means a transfer, sale, assignment, pledge, hypothecation
--------
or other disposition (including, without limitation, by operation of law),
whether directly or indirectly pursuant to the creation of a derivative
security, the grant of an option or other right.
"Transfer Offer" means the offer to sell the Transfer Securities owned
--------------
by the Transferring Securityholder to all other Securityholders in
accordance with Section 2.2(a), if the Company shall decline to purchase
all or any portion of the Transfer Securities.
"Transfer Period" has the meaning set forth in Section 2.2(c).
---------------
"Transfer Securities" has the meaning set forth in Section 2.2(a).
-------------------
"Transferring Securityholder" has the meaning set forth in Section
---------------------------
2.2(a).
"Twelve-Month Normalized EBITDA" means, as of any date, the
------------------------------
Consolidated EBITDA for the 12-month period ending on the last day of the
most recent quarter for
8
which consolidated financial statements of the Company have been filed with
the SEC (or, if the Company is not then filing such statements with the
SEC, the most recent quarter for which such statements are available);
provided, however that such determination of Consolidated EBITDA shall be
-------- -------
adjusted for such period to (i) include the pro forma effects for the
entire period of any acquisitions or dispositions by the Company since the
beginning of such period and (ii) disregard any extraordinary or similar
one-time charges or revenues of the Company.
"Violation" has the meaning set forth in Section 3.9(a).
---------
"White" means W. Xxxxx Xxxxx.
-----
"Xxxxx" means Xxxxxxx X. Xxxxx.
-----
1.2. Construction.
-----------------
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party. Unless the context otherwise
requires: (a) "or" is disjunctive but not exclusive, (b) words in the singular
include the plural, and in the plural include the singular, and (c) the words
"hereof," "herein," and "hereunder" and words of similar import when used in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section references are to this Agreement unless
otherwise specified.
II TRANSFERS
2.1. Limitations on Transfer.
----------------------------
(a) Each Securityholder hereby agrees that it will not, directly or
indirectly, Transfer any shares of Common Stock or FS Warrants (collectively,
the "Restricted Securities") unless such Transfer complies with the provisions
---------------------
hereof and (i) such Transfer is pursuant to an effective registration statement
under the Securities Act and has been registered under all applicable state
securities or "blue sky" laws or (ii) such Securityholder shall have furnished
the Company with a written opinion of counsel in form and substance reasonably
satisfactory to the Company to the effect that no such registration is required
because of the availability of an exemption from registration under the
Securities Act and all applicable state securities or "blue sky" laws.
(b) During the Restricted Period,
(i) each of the Non-XXXX Parties may not Transfer any Restricted
Securities other than (x) pursuant to Sections 2.3, 2.4 or 2.5, (y) with
respect to the FS Parties and the Other Non-Management Parties only,
Transfers after the applicable Permitted Third Party Transfer Date to
Persons other than a Permitted Transferee of the Securityholder making the
Transfer (subject to prior compliance in full with Section 2.2 and such
Persons executing and delivering Assumption Agreements to the Company), and
(z) with respect to the DLJ Parties only, Transfers of Restricted
Securities in
9
connection with Transfers of Notes to the same transferee (subject to such
Persons executing and delivering Assumption Agreements to the Company); and
(ii) XXXX and its Affiliates will not Transfer any Restricted
Securities in a transaction subject to Section 2.4 unless Section 2.4 is
complied with in full prior to such Transfer.
(c) In the event of any purported Transfer by any of the
Securityholders of any Restricted Securities in violation of the provisions of
this Agreement, such purported Transfer will be void and of no effect and the
Company will not give effect to such Transfer.
(d) Each certificate representing Restricted Securities issued to the
Securityholders will bear a legend on the face thereof substantially to the
following effect (with such additions thereto or changes therein as the Company
may be advised by counsel are required by law or necessary to give full effect
to this Agreement, the "Legend"):
------
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SECURITYHOLDERS' AGREEMENT AMONG XXXX XX HOLDING CORP., RCBA STRATEGIC
PARTNERS, L.P., FS EQUITY PARTNERS III, L.P., FS EQUITY PARTNERS
INTERNATIONAL, L.P., THE XXXX HOLDING COMPANY, XXXXXXXX X. XXXXX, DLJ
INVESTMENT FUNDING, INC. AND CERTAIN MANAGEMENT INVESTORS, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY. NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL
OF THE PROVISIONS OF SUCH SECURITYHOLDERS' AGREEMENT."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE."
The Legend will be removed by the Company by the delivery of substitute
certificates without such Legend in the event of (i) a Transfer permitted by
this Agreement in which the Permitted Transferee is not required to enter into
an Assumption Agreement or (ii) the termination of Article II pursuant to the
terms hereof; provided, however, that the second paragraph of the Legend will
-------- -------
only be removed if at such time it is no longer required for purposes of
applicable securities laws and, if requested by the Company, the Company
receives an opinion to such effect of counsel to the applicable Securityholder
in form and substance reasonably satisfactory to the Company.
10
2.2. Right of First Offer.
-------------------------
(a) If, following the Permitted Third Party Transfer Date, any of the
FS Parties or the Other Non-Management Parties (each, a "Transferring
------------
Securityholder") desires to Transfer all or any portion of the Restricted
--------------
Securities (the "Transfer Securities") then owned by such Transferring
-------------------
Securityholder to a Person that is not a Permitted Transferee of the
Transferring Securityholder, such Transferring Securityholder shall provide XXXX
with a written notice (the "Offer Notice") setting forth: (i) the number of
------------
shares of Common Stock proposed to be Transferred and (ii) the material terms
and conditions of the proposed transfer including the minimum price (the "Offer
-----
Price") at which such Transferring Securityholder proposes to Transfer such
-----
shares. The Offer Notice shall also constitute an irrevocable offer to sell the
Transfer Securities to XXXX or, at XXXX'x option following receipt of the Offer
Notice, to one or more assignees of XXXX (subject to such assignee's or
assignees' delivery of an Assumption Agreement in compliance with Section 6.5
hereof) (x) at the Offer Price and on the same terms and conditions as the
Transfer Offer or (y) if the Transfer Offer includes any consideration other
than cash, at the option of XXXX or such assignee, at a cash price equal to the
Fair Market Value of such non-cash consideration (the "Transfer Consideration").
----------------------
(b) If XXXX or its assignee wishes to accept the offer set forth in
the Offer Notice, XXXX or such assignee shall deliver within 15 business days of
receipt of the Offer Notice (such period, the "Election Period") an irrevocable
---------------
notice of acceptance to the Transferring Securityholder (the "Acceptance
----------
Notice"), which Notice shall indicate the form of Transfer Consideration chosen
------
(to the extent that the Transfer Offer includes any consideration other than
cash). XXXX or its assignee may accept such offer for any or all of the
Transfer Securities, provided, however, that if XXXX or its assignee agrees to
-----------------
purchase less than all of the Transfer Securities specified in the Offer Notice,
then the Transferring Securityholder can choose not to sell any shares to XXXX
or its assignee, as applicable, by delivering written notice thereof to XXXX or
such assignee within five Business Days of the Transferring Securityholder's
receipt of the Acceptance Notice. In the event that the Transferring
Securityholder elects not to sell any shares to XXXX or its assignee pursuant to
the proviso in the immediately preceding sentence, such Transferring Shareholder
may transfer the Transfer Securities to one or more Qualified Purchasers
pursuant to Section 2.2(c) only if such Qualified Purchasers purchase in the
aggregate at least as many shares of the Transfer Securities as XXXX had agreed
to purchase.
(c) If the option to purchase the Transfer Securities represented by
the Offer Notice is accepted on a timely basis by XXXX or its assignee, in
accordance with all the terms specified in Section 2.2(b) and such acceptance
(if it is for less than all of the Transfer Securities) has not been rejected by
the Transferring Securityholder, no later than the later of (x) 30 business days
after the date of the receipt by XXXX of the Offer Notice or (y) the second
business day after the receipt of any necessary governmental approvals
(including, without limitation, the expiration or early termination of any
applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended), XXXX (or its assignee), as applicable, shall deliver
payment by wire transfer of immediately available funds, to the extent the
Transfer Consideration is cash, and/or by delivery of the non-cash Transfer
Consideration (to the extent chosen by XXXX or its assignee), to such
Transferring Securityholder against delivery of certificates or other
instruments representing the Common Stock so purchased, appropriately
11
endorsed by such Transferring Securityholder. Each Transferring Securityholder
shall deliver its shares of Common Stock free and clear of all liens, claims,
options, pledges, encumbrances and security interests. To the extent XXXX or its
assignee (i) has not given notice of its acceptance of the offer represented by
the Offer Notice to purchase all of the Transfer Securities prior to the
expiration of the Election Period, (ii) has accepted as to less than all of the
Transfer Securities and such acceptance has been rejected by the Transferring
Securityholder, (iii) has accepted as to less than all of the Transfer
Securities and such acceptance has not been rejected by the Transferring
Securityholder, or (iv) has not tendered the Purchase Price for the Transfer
Securities in the manner and within the period set forth above in this Section
2.2(c), such Transferring Securityholder shall be free (subject to the last
sentence of Section 2.2(b)) for a period of 120 days from the end of the
Election Period to transfer the Transfer Securities (or in the case of the
foregoing clause (iii), such remaining portion of the Transfer Securities) to a
Qualified Purchaser at a price equal to or greater than the Offer Price and
otherwise on terms which are no more favorable in any material respect to such
Qualified Purchaser than the terms and conditions set forth in the Offer Notice.
If for any reason such Transferring Securityholder does not transfer the
Transfer Securities (or in the case of the foregoing clause (iii), such
remaining portion of the Transfer Securities) to a Qualified Purchaser on such
terms and conditions or if such Transferring Securityholder wishes to Transfer
the Transfer Securities (or in the case of the foregoing clause (iii), such
remaining portion of the Transfer Securities) at a lower Purchase Price or on
terms which are more favorable in any material respect to a Qualified Purchaser
than those set forth in the Offer Notice, the provisions of this Section 2.2
shall again be applicable to the Transfer Securities (or in the case of the
foregoing clause (iii), such remaining portion of the Transfer Securities);
provided that if the Transferring Securityholder does not transfer all of the
-------- ----
Transfer Securities (or in the case of the foregoing clause (iii), such
remaining portion of the Transfer Securities) to a Qualifying Purchaser within
120 days from the end of the Election Period (the "Transfer Period") then such
Transferring Securityholder may not deliver another Offer Notice until 90 days
have elapsed since the end of the Transfer Period.
2.3. Certain Permitted Transfers.
--------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
each Non-XXXX Party shall be entitled from time to time to Transfer any or all
of the Restricted Securities held by it to (i) any of its Affiliates, (ii) in
the case of the FS Entities, beginning on April 12, 2003, on a pro rata basis to
the partners of such Transferor or (iii) in the case of any Non-XXXX Party
(including any transferee that receives shares from an FS Entity pursuant to
clause (ii) of this Section 2.3) who is an individual, (A) such Transferor's
spouse or direct lineal descendants (including adopted children) or antecedents,
(B) a charitable remainder trust or trust, in each case the current
beneficiaries of which, or to a corporation or partnership, the stockholders or
limited or general partners of which, include only such transferor and/or such
transferor's spouse and/or such transferor's direct lineal descendants
(including adopted children) or antecedents, or (C) the executor, administrator,
testamentary trustee, legatee or beneficiary of any deceased transferor holding
Restricted Securities or (iv) in the case of a transferee from an FS Entity
pursuant to clause (ii) of this Section 2.3 that is a corporation, partnership,
limited liability company, trust or other entity, pro rata without payment of
consideration, to its shareholders, partners, members, beneficiaries or other
entity owners, as the case may be; provided that with respect to each of the
--------
foregoing (x) any such transferee duly executes and delivers an Assumption
Agreement, (y) each such transferee pursuant to clause (i) or (iii) shall, and
each such Transferring Non-XXXX Party
12
shall cause such transferee (and, if applicable, such transferee's spouse) to,
Transfer back to such Transferring Non-XXXX Party any Restricted Securities it
owns prior to such transferee ceasing to satisfy any of the foregoing clause (i)
or (iii) of this Section 2.3 with respect to its relationship to such
Transferring Non-XXXX Party, and (z) if requested by the Company the Company has
been furnished with an opinion of counsel in connection with such Transfer, in
form and substance reasonably satisfactory to the Company, that such Transfer is
exempt from or not subject to the provisions of Section 5 of the Securities Act
and any other applicable securities laws.
2.4. Tag-Along Rights.
---------------------
(a) Prior to an Initial Public Offering, with respect to any proposed
Transfer by XXXX and its Affiliates of shares of Common Stock to any Person
other than XXXX and its Affiliates (each a "Third Party") (other than in a
-----------
Public Offering, which shall be subject to Article III), whether pursuant to a
stock sale, merger, consolidation, a tender or exchange offer or any other
transaction (any such transaction, a "XXXX Sale"), XXXX and its Affiliates will
---------
have the obligation, and each of the Non-XXXX Parties will have the right, to
require the proposed transferee or acquiring Person (a "Proposed Transferee") to
-------------------
purchase from each of the Non-XXXX Parties who exercises its rights under
Section 2.4(b) (a "Tagging Securityholder") a number of shares of Common Stock
----------------------
up to the product (rounded to the nearest whole number of shares) of (i) the
quotient determined by dividing (A) the aggregate number of outstanding shares
of such class owned by such Tagging Securityholder by (B) the aggregate number
of outstanding shares of such class and (ii) the total number of shares of such
class proposed to be directly or indirectly Transferred to the Proposed
Transferee at the same price per share and upon the same terms and conditions
(including, without limitation, time of payment and form of consideration) as to
be paid by and given to XXXX and/or its Affiliates (as applicable). In order to
be entitled to exercise its right to sell shares of Common Stock to the Proposed
Transferee pursuant to this Section 2.4, each Tagging Securityholder must agree
to make to the Proposed Transferee the same covenants, indemnities (with respect
to all matters other than XXXX'x and/or its Affiliates' Ownership of Common
Stock) and agreements as XXXX and/or its Affiliate (as applicable) agrees to
make in connection with the XXXX Sale and such representations and warranties
(and related indemnification) as to its Ownership of its Common Stock as are
given by XXXX and/or its Affiliate (as applicable) with respect to such party's
Ownership of Common Stock; provided, that all such covenants, indemnities and
--------
agreements shall be made by each Tagging Securityholder, severally and not
jointly, and that the liabilities thereunder (other than with respect to
Ownership, which shall be several obligations) shall be borne on a pro rata
basis based on the number of shares Transferred by each of XXXX, and its
Affiliates and the Tagging Securityholders. Each Tagging Securityholder will be
responsible for its proportionate share of the reasonable out-of-pocket costs
incurred by XXXX and its Affiliates in connection with the XXXX Sale to the
extent not paid or reimbursed by the Company or the Proposed Transferee.
(b) XXXX will give notice to each Tagging Securityholder of each
proposed XXXX Sale at least 15 business days prior to the proposed consummation
of such XXXX Sale, setting forth the number of shares of Common Stock proposed
to be so Transferred, the name and address of the Proposed Transferee, the
proposed amount and form of consideration (and if such consideration consists in
part or in whole of property other than cash, XXXX will provide such
information, to the extent reasonably available to XXXX, relating to such
consideration as
13
the Tagging Securityholder may reasonably request in order to evaluate such non-
cash consideration) and other terms and conditions of payment offered by the
Proposed Transferee. The tag-along rights provided by this Section 2.4 must be
exercised by each Tagging Securityholder within 10 business days following
receipt of the notice required by the preceding sentence by delivery of an
irrevocable written notice to XXXX indicating such Tagging Securityholder's
exercise of its, her or his rights and specifying the number of shares of Common
Stock it, she or he desires to sell. The Tagging Securityholder will be entitled
under this Section 2.4 to Transfer to the Proposed Transferee the number of
shares of Common Stock determined in accordance with Section 2.4(a).
(c) If any Tagging Securityholder exercises its, her or his rights
under Section 2.4(a), the closing of the purchase of the Common Stock with
respect to which such rights have been exercised is subject to, and will take
place concurrently with, the closing of the sale of XXXX'x or its Affiliate's
Common Stock to the Proposed Transferee.
2.5. Drag-Along Rights.
----------------------
(a) If XXXX and/or its Affiliates (in such capacity, the "Dragging
--------
Party") agree to Transfer to a Third Party or a group of Third Parties (other
-----
than in a Public Offering) a majority of the shares of Common Stock beneficially
owned by XXXX and its Affiliates at the time of such Transfer, then each of the
Non-XXXX Parties hereby agrees that, if requested by the Dragging Party, it will
Transfer to such Third Party on the same terms and conditions (including,
without limitation, time of payment and form of consideration, but subject to
Section 2.5(b)) as to be paid and given to the Dragging Party, the same portion
(as determined by the immediately succeeding sentence) of such Non-XXXX Party's
Restricted Securities as is being Transferred by XXXX and its Affiliates. Each
Non-XXXX Party can be required to sell pursuant to this Section 2.5 that number
of Restricted Securities equal to the product obtained by multiplying (i) a
fraction, (A) the numerator of which is the aggregate number of shares of Common
Stock to be Transferred by XXXX and its Affiliates and (B) the denominator of
which is the aggregate number of shares of Common Stock owned by XXXX and its
Affiliates at the time of the Transfer by (ii) the aggregate number of shares of
Common Stock owned by such Non-XXXX Party (including for these purposes all
shares of Common Stock issuable upon exercise, exchange or conversion of other
Equity Securities).
(b) The Dragging Party will give notice (the "Drag-Along Notice") to
-----------------
each of the Non-XXXX Parties of any proposed Transfer giving rise to the rights
of the Dragging Party set forth in Section 2.5(a) at least ten (10) calendar
days prior to such Transfer. The Drag-Along Notice will set forth the number of
shares of Common Stock proposed to be so Transferred, the name of the Proposed
Transferee, the proposed amount and form of consideration (and if such
consideration consists in part or in whole of property other than cash, the
Dragging Party will provide such information, to the extent reasonably available
to the Dragging Party, relating to such consideration as the Non-XXXX Parties
may reasonably request in order to evaluate such non-cash consideration), the
number of Restricted Securities sought and the other terms and conditions of the
proposed Transfer. In connection with any such Transfer, such Non-XXXX Parties
shall be obligated only to (i) make representations and warranties (and provide
related indemnification) as to their respective individual Ownership of
Restricted Securities (and then only to the same extent such representations and
warranties are given by the Dragging Party with
14
respect to its Ownership of Common Stock), (ii) agree to pay its pro rata share
(based on the number of shares transferred by each stockholder in such
transaction) of any liability arising out of any representations, warranties,
covenants or agreements of the selling Securityholders that survive the closing
of such transaction and do not relate to Ownership of Restricted Securities;
provided, however that this Section 2.5(b)(ii) shall not apply if, no later than
-------- -------
five (5) calendar days after receipt of the Drag-Along Notice by the FS
Entities, the FS Entities deliver to XXXX a certificate signed by the FS
Entities certifying in good faith that they (x) do not desire to Transfer any of
the Restricted Securities beneficially owned by them in the proposed Transfer
set forth in the Drag-Along Notice and (y) would not exercise their rights
pursuant to Section 2.4 hereto in connection with such proposed Transfer if XXXX
had not otherwise delivered a Drag-Along Notice with respect thereto, and (iii)
agree to pay their proportionate share of the reasonable costs incurred in
connection with such transaction to the extent not paid or reimbursed by the
Company or the Proposed Transferee. If the Transfer referred to in the Drag-
Along Notice is not consummated within 120 days from the date of the Drag-Along
Notice, the Dragging Party must deliver another Drag-Along Notice in order to
exercise its rights under this Section 2.5 with respect to such Transfer or any
other Transfer.
(c) If XXXX approves (i) any merger, consolidation, amalgamation or
other business combination involving the Company or any of its Subsidiaries or
(ii) the sale of all of the business or assets of, or substantially all of the
assets of, the Company or any of its Subsidiaries (any of the foregoing events,
a "Transaction"), then each of the Non-XXXX Parties agrees to vote all shares of
-----------
Common Stock held by it or its Affiliates to approve such Transaction and not to
exercise any appraisal or dissenters' rights available to such Non-XXXX Parties
under any rule, regulation, statute, agreement among the stockholders, the
Certificate of Incorporation, the Bylaws or otherwise.
2.6. Participation Right.
------------------------
(a) The Company shall not issue (an "Issuance") additional Equity
--------
Securities of the Company to any Person (other than (i) Equity Securities issued
upon the exchange, exercise or conversion of other Equity Securities in
accordance with the terms thereof, (ii) Equity Securities issued in connection
with any stock split, stock dividend or recapitalization of the Company, as long
as the same is fully proportionate for each class of affected security and
entails equal treatment for all shares or units of such class, (iii) Equity
Securities issued by the Company pursuant to the acquisition by the Company or
its Subsidiaries of another Person or a material portion of the assets thereof,
by merger, purchase of assets or otherwise, (iv) Equity Securities issued to
employees, officers directors, or consultants of the Company or its
Subsidiaries, (v) Equity Securities issued in connection with a Public Offering
or (vi) Equity Securities issued to customers, venders, lenders, and other non-
equity financing sources, lessors of equipment and other providers of goods or
services to the Company or its Subsidiaries, each of which will not be subject
to this Section 2.6), unless, prior to such Issuance, the Company notifies each
Securityholder party hereto in writing of the Issuance and grants to each such
Securityholder or, at such Securityholder's election, one of its Affiliates, the
right (the "Right") to subscribe for and purchase such Securityholder's pro rata
-----
share (determined as provided below) of such additional Equity Securities so
issued at the same price and upon the same terms and conditions as issued in the
Issuance. Each Securityholder's pro rata share is equal to the ratio of (A) the
number of shares of Common Stock owned by such Securityholder (including for
15
these purposes all shares of Common Stock issuable upon exercise, exchange or
conversion of other Equity Securities) to (B) the total number of shares of the
Company's outstanding Common Stock (including for these purposes all shares of
Common Stock issuable upon exercise, exchange or conversion of other Equity
Securities) immediately prior to the issuance of the Equity Securities.
(b) The Right may be exercised by each Securityholder party hereto or
its Affiliates at any time by written notice to the Company received by the
Company within 10 business days after receipt of notice from the Company of the
Issuance, and the closing of the purchase and sale pursuant to the exercise of
the Right shall occur at least 20 business days after the giving of the notice
of the Issuance by the Company and prior to or concurrently with the closing of
the Issuance. Notwithstanding the foregoing (i) the Right shall not apply to
any Issuance, pro rata, to all holders of Common Stock and (ii) the Company
--- ----
shall not be required to offer or sell any Equity Security to any Securityholder
who is not an "accredited investor" as defined in Regulation D of the rules and
regulations promulgated by the SEC under the Exchange Act or who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
III REGISTRATION RIGHTS
3.1. Demand Registration.
------------------------
(a) Subject to the conditions of this Section 3.1, if the Company
shall receive a written request from (i) XXXX Holders holding not less than 25%
of the Registrable Securities then outstanding held by the XXXX Holders, (ii) FS
Holders holding not less than 25% of the Registrable Securities then outstanding
held by the FS Holders or (iii) DLJ Holders holding not less than 50% of the
Registrable Securities then outstanding held by the DLJ Holders, that the
Company file a registration statement under the Securities Act covering the
registration of Registrable Securities, then the Company shall, within five (5)
days of the receipt thereof, give written notice of such request to all Holders,
who must respond in writing within fifteen (15) days requesting inclusion in the
registration. The request must specify the amount and intended disposition of
such Registrable Securities. The Company, subject to the limitations of this
Section 3.1, must use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered in accordance with this Section 3.1 together
with any other securities of the Company entitled to inclusion in such
registration.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 3.1
and the Company shall include such information in the written notice referred to
in Section 3.1(a). In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
16
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding
any other provision of this Section 3.1, if the managing underwriter advises the
Company in writing that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) because the
number of securities to be underwritten is likely to have an adverse effect on
the price, timing or the distribution of the securities to be offered, then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated among participating Holders, (i)
first among the Initiating Holders as nearly as possible on a pro rata basis
based on the total number of Registrable Securities held by all such Initiating
Holders and (ii) second to the extent all Registrable Securities requested to be
included in such underwriting by the Initiating Holders have been included,
among the Holders requesting inclusion of Registrable Securities in such
underwritten offering (other than the Initiating Holders), as nearly as possible
on a pro rata basis based on the total number of Registrable Securities held by
all such Holders. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration. To facilitate the
allocation of shares in accordance with the foregoing, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
(c) The Company shall not be required to effect a registration
pursuant to this Section 3.1:
(i) prior to the date one hundred eighty (180) days following
the effective date of the registration statement pertaining to the Initial
Public Offering;
(ii) in the case of (x) a registration requested by XXXX Holders
pursuant to Section 3.1(a)(ii), after the Company has effected six (6)
registrations requested by XXXX Holders pursuant to such Section, (y) a
registration requested by FS Holders pursuant to Section 3.1(a)(ii), after
the Company has effected three (3) registration requested by FS Holders
pursuant to such Section, and (z) a registration requested by DLJ Holders
pursuant to Section 3.1(a)(ii), after the Company has effected one (1)
registration requested by DLJ Holders pursuant to such Section, and in the
case of each of the foregoing clauses (x), (y) and (z), such registrations
have been declared or ordered effective;
(iii) if the anticipated aggregate gross proceeds to be received
by such Holders are less than $2,000,000;
(iv) if within five (5) days of receipt of a written request
from the Initiating Holders pursuant to Section 3.1(a), the Company in good
faith gives notice to the Initiating Holders of the Company's intention to
make a public offering within ninety (90) days in which case Section 3.2
shall govern; provided that if the Company does not file a registration
statement under the Securities Act relating to such public offering within
such ninety (90) day period (such 90 day period being referred to herein as
the "Relevant Period") the Company shall be prohibited from delivering
---------------
additional notices pursuant to this Section 3.1(c)(iv) until the 181/st/
day following the last day of the Relevant Period; or
17
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 3.1, a certificate signed
by the Chairman of the Board stating that in the good faith judgment of the
Board, it would be seriously detrimental to the Company for such
registration statement to be effected at such time, in which event the
Company shall have the right to defer such filing for a period of not more
than ninety (90) days after receipt of the request of the Initiating
Holders; provided that the Company shall not defer filings pursuant to this
--------
clause (v) more than an aggregate of ninety (90) days in any twelve (12)
month period.
(d) The Company shall select the registration statement form for any
registration pursuant to Section 3.1, but shall cooperate with the requests of
the Initiating Shareholders or managing underwriters selected by them as to the
inclusion therein of information not specifically required by such form.
3.2. Piggyback Registrations.
----------------------------
(a) The Company shall notify all Holders of Registrable Securities in
writing at least fifteen (15) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding (i) registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act; (ii) any registration statement filed pursuant to Section 3.1
(with respect to which the Holders rights to participate in such registered
offering shall be governed by Section 3.1); and (iii) any registration statement
relating to the Initial Public Offering) and, subject to Section 3.13(a), will
use its best efforts to afford each such Holder an opportunity to include in
such registration statement all or part of such Registrable Securities held by
such Holder. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it shall, within fifteen
(15) days after the above-described notice from the Company, so notify the
Company in writing. Such notice shall state the intended method of disposition
of the Registrable Securities by such Holder. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(b) If the registration statement under which the Company gives
notice under this Section 3.2 is for an underwritten offering, the Company shall
so advise the Holders of Registrable Securities as part of the written notice
provided to the Holders pursuant to Section 3.2(a). In such event, the right of
any such Holder to be included in a registration pursuant to this Section 3.2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Agreement, if the managing underwriter advises the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten
18
(including Registrable Securities) in an offering subject to this Section 3.2
because the number of securities to be underwritten is likely to have an adverse
effect on the price, timing or the distribution of securities to be offered,
then the Company shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated, first, to the Company
and second, to the Holders on a pro rata basis based on the total number of
Registrable Securities held by the Holders. No such reduction shall (i) reduce
the securities being offered by the Company for its own account to be included
in the registration and underwriting, or (ii) reduce the amount of securities of
the selling Holders included in the registration below twenty-five percent (25%)
of the total amount of securities included in such registration, unless such
offering does not include shares of any other selling shareholders, in which
event any or all of the Registrable Securities of the Holders may be excluded in
accordance with the immediately preceding sentence.
(c) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 3.2 prior to the effectiveness
of such registration whether or not any Holder has elected to include securities
in such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Company in accordance with Section 3.3 hereof.
3.3. Expenses of Registration.
-----------------------------
Except as specifically provided herein, all Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 3.1 or Section 3.2 herein shall be borne by the Company.
All Selling Expenses incurred in connection with any registrations hereunder,
shall be borne by the Holders of the Registrable Securities so registered pro
rata on the basis of the number of shares so registered. The Company shall not,
however, be required to pay for expenses of any registration proceeding begun
pursuant to Section 3.1, the request of which has been subsequently withdrawn by
the Initiating Holders unless (a) the withdrawal is based upon material adverse
information concerning the Company of which the Initiating Holders were not
aware at the time of such request or (b) (x) XXXX Holders holding not less than
50% of the Registrable Securities then outstanding held by all XXXX Holders, in
the case of a registration requested pursuant to Section 3.1(a)(i) or (y) FS
Holders holding not less than 50% of the Registrable Securities then
outstanding, in the case of a registration requested pursuant to Section
3.1(a)(ii), agree to forfeit their right to one requested registration pursuant
to Section 3.1, as applicable, in which event such right shall be forfeited by
all XXXX Holders, in the case of clause (x), and all FS Holders in the case of
clause (y). If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 3.1 to a demand
registration.
3.4. Effective Registration Statement.
-------------------------------------
A registration requested pursuant to Section 3.1 will not be deemed to
have been effected unless it has become effective and all of the Registrable
Securities registered thereunder
19
have been sold; provided, that if within 180 days after it has become effective,
--------
the offering of Registrable Securities pursuant to such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental entity, such registration shall be deemed
not to have been effected.
3.5. Selection of Counsel.
-------------------------
In connection with any registration of Registrable Securities pursuant
to Sections 3.1 or 3.2 hereof, the Holders of a majority in interest of the
Initiating Holders (or the Holders of a majority of the Registrable Securities
covered by the registration pursuant to Section 3.2) may select one counsel to
represent all Holders of Registrable Securities covered by such registration;
provided, however, that in the event that the counsel selected as provided above
-------- -------
is also acting as counsel to the Company in connection with such registration,
the remaining Holders shall be entitled to select one additional counsel to
represent all such remaining Holders.
3.6. Obligations of the Company.
-------------------------------
Whenever required to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
(a) (1) in the case of a registration initiated under Section 3.1
prepare and, in any event within ninety (90) days after the receipt of the
notice contemplated by Section 3.1(a), file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, (2) in the case
of any registration effected under Section 3.1, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred and eighty (180) days or,
if earlier, until the Holder or Holders have completed the distribution related
thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement; provided, that before filing a registration statement or
--------
prospectus, or any amendments or supplements thereto, the Company will furnish
to counsel (selected pursuant to Section 3.5 hereof) for the Holders of
Registrable Securities copies of all documents proposed to be filed, which
documents will be subject to the review of such counsel.
(c) Furnish to each Holder such number of copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits filed therewith including any documents incorporated by reference),
such number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as such
Holder may reasonably request in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall
20
be reasonably requested by the Holders, request, and do any and all other acts
and things which may be reasonably necessary or advisable to enable such Holder
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Holder; provided, that the Company shall not be
--------
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
(e) Use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental entities as may be necessary to enable the Holders thereof to
consummate the disposition of such Registrable Securities.
(f) Enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification provisions in
favor of underwriters and other Persons in addition to, or in substitution for
the provisions of Section 3.9 hereof, and take such other actions as Holders of
a majority of shares of such Registrable Securities or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities.
(g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and prepare and furnish to each Holder any supplement or amendment
necessary so that the supplemented or amended prospectus no longer includes such
untrue or misleading statements or omissions of material fact.
(h) Otherwise comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable (but not more than 18 months) after the effective date of the
registration statement, an earnings statement which shall satisfy the provisions
of Section 11(a) of the Securities Act.
(i) Use its best efforts to list such Registrable Securities on any
securities exchange on which the Common Stock is then listed if such Registrable
Securities are not already so listed and if such listing is then permitted under
the rules of such exchange, and use its best efforts to provide a transfer agent
and registrar for such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement.
(j) Furnish, at the request of the Holders of a majority of the
Registrable Securities being registered in the registration, on the date that
such Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably
21
satisfactory in form, substance and scope to a majority in interest of the
Initiating Holders (or Holders requesting registration in the case of a
registration pursuant to Section 3.2), addressed to the underwriters, if any,
and to the Holders requesting registration of Registrable Securities and (ii) a
"cold comfort" letter dated as of such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Initiating Holders (or Holders requesting registration in the case of a
registration pursuant to Section 3.2), addressed to the underwriters, if any,
and if permitted by applicable accounting standards, to the Holders requesting
registration of Registrable Securities.
(k) Make available for inspection by any Holder of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
Holder or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant or
agent in connection with such registration statement.
(l) Notify counsel (selected pursuant to Section 3.5 hereof) for the
Holders of Registrable Securities included in such registration statement and
the managing underwriter or agent, immediately, and confirm the notice in
writing (i) when the registration statement, or any post-effective amendment to
the registration statement, shall have become effective, or any supplement to
the prospectus or any amendment prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request of the
Commission to amend the registration statement or amend or supplement the
prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the registration
statement for offering or sale in any jurisdiction, or of the institution or
threatening of any legal actions for any of such purposes.
(m) Make every reasonable effort to prevent the issuance of any stop
order suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment.
(n) If requested by the managing underwriter or agent or any Holder of
Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such Holder reasonably
requests to be included therein, including, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter or agent,
the Purchase Price being paid therefor by such underwriter or agent and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as
22
practicable after being notified of the matters incorporated in such prospectus
supplement or post-effective amendment.
(o) Cooperate with the Holders of Registrable Securities covered by
the registration statement and the managing underwriter or agent, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing securities to be sold under the registration
statement, and enable such securities to be in such denominations and registered
in such names as the managing underwriter or agent, if any, or such Holders may
request.
(p) Cooperate with each Holder of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc.
(q) Make available the executive officers of the Company to
participate with the Holders of Registrable Securities and any underwriters in
any "road shows" or other selling efforts that may be reasonably requested by
the Holders in connection with the methods of distribution for the Registrable
Securities.
3.7. Termination of Registration Rights.
---------------------------------------
A Holder's registration rights pursuant to this Article III shall
expire if (i) the Company has completed its Initial Public Offering and is
subject to the provisions of the Exchange Act, (ii) such Holder (together with
its Affiliates, partners and former partners) holds less than 2% of the
Company's outstanding Common Stock and (iii) all Registrable Securities held by
such Holder (and its Affiliates, partners and former partners) may be sold under
Rule 144 during any ninety (90) day period. Upon expiration of a Holder's
registration rights pursuant to this Section 3.7, the obligations of the Company
under this Article III to give such Holder notice of registrations or take any
other actions under this Article III with respect to the registration of
securities held by such Holder shall also terminate.
3.8. Delay of Registration; Furnishing Information.
--------------------------------------------------
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to Section 3.1 or 3.2 that the selling Holders shall
furnish to the Company upon written request of the Company such information
regarding themselves, the Registrable Securities held by them and the intended
method of disposition of such securities as shall reasonably be required to
effect the registration of their Registrable Securities.
3.9. Indemnification.
--------------------
(a) The Company will indemnify and hold harmless each Holder, the
Affiliate of each Holder and their respective partners, officers and directors
(and any director, officer, Affiliate, employee, agent or controlling Person of
any of the foregoing), legal counsel and accountants of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each Person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages,
liabilities (joint or
23
several) or expenses, as incurred, to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) or
expenses arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation") by the Company: (i) any
---------
untrue statement or alleged untrue statement of a material fact contained in any
registration statement, including any preliminary prospectus, summary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such registration
statement; and the Company will reimburse each such Holder, partner, officer or
director, underwriter, legal counsel, accountants or controlling Person for any
legal or other expenses, as incurred, reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 3.9(a) shall not apply (x) to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling Person of
such Holder, and (y) to indemnify underwriters in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act with respect to
preliminary, final or summary prospectus, or any amendments or supplement
thereto, to the extent that it is established that any such action, loss,
damage, liability or expense of such underwriter or controlling Person resulted
from the fact that such underwriter sold Registrable Securities to a Person whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the final prospectus (including any documents incorporated by
reference therein) or of the final prospectus, as then amended or supplemented
(including any documents incorporated by reference therein), whichever is most
recent, if the Company has previously furnished copies thereof to such
underwriter.
(b) Each Holder will, severally but not jointly, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers, legal counsel,
accountants and each Person, if any, who controls the Company within the meaning
of the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's partners,
directors or officers, legal counsel, accountants or any Person who controls
such Holder, against any losses, claims, damages, liabilities (joint or several)
or expenses to which the Company or any such director, officer, controlling
Person, underwriter or other such Holder, or partner, director, officer, legal
counsel, accountants or controlling Person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) or expenses arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an
24
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling Person, underwriter or other Holder, or partner, officer,
director or controlling Person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
-------- -------
that the indemnity agreement contained in this Section 3.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, further, that in no event shall
-------- -------
any indemnity under this Section 3.9 exceed the total net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Section 3.9, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided that the failure of the indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 3.9 only to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity provided for in this Section 3.9 is
unavailable to an indemnified party, the indemnifying party shall contribute to
the aggregate losses, damages, liabilities and expenses (collectively, "Losses")
------
of the nature contemplated by such indemnity incurred by any indemnified party,
(i) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified parties on the other, in
connection with the statements or omissions which resulted in such Losses or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative fault of but also the relative benefits to the indemnifying party on
the one hand and each such indemnified party on the other, in connection with
the statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative benefits to the indemnifying
party and the indemnified party shall be determined by reference to, among other
things, the total proceeds received by the indemnifying party and the
indemnified party in connection with the offering to which such losses relate.
The relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or related to
information supplied by, the indemnifying party or the indemnified party, and
the
25
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The parties hereto agree that it would be not be
just or equitable if contribution pursuant to this Section 3.9 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 3.10, no indemnified
party shall be required to contribute any amount in excess of the amount of
total net proceeds to such indemnified party from sales of the Registrable
Securities of such indemnified party pursuant to the offering that gave rise to
such Losses.
(e) The obligations of the Company and Holders under this Section 3.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement.
3.10. Assignment of Registration Rights.
---------------------------------------
The rights to cause the Company to register Registrable Securities
pursuant to this Article III may be assigned by a Holder to a transferee of such
Registrable Securities; provided, however, that in each case (i) such Transfer
-------- -------
of Registrable Securities shall comply with the provisions of Article II hereto,
(ii) the Transferor shall, within ten (10) days after such Transfer, furnish
to the Company written notice of the name and address of such transferee and the
securities with respect to which such registration rights are being Transferred
and (iii) such transferee shall execute and deliver to XXXX and the Company an
Assumption Agreement and become bound by the provisions of this Agreement in the
manner set forth in Section 6.5 hereto.
3.11. Amendment of Registration Rights.
--------------------------------------
Any provision of this Article III may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company,
XXXX and the Holders of at least a majority of the Registrable Securities then
outstanding; provided that no such amendment shall adversely affect the rights
--------
of the FS Holders relative to the rights of the XXXX Holders without the written
consent of the Holders of a majority of the Registrable Securities then
outstanding held by the FS Holders, provided, further that no such amendment
-------- -------
shall adversely affect the rights of the DLJ Holders relative to the rights of
the XXXX Holders without the written consent of the Holders of a majority of the
Registrable Securities then outstanding held by all DLJ Holders and provided,
--------
further that no such amendment shall adversely affect the rights of the Other
-------
Holders relative to the rights of the XXXX Holders without the written consent
of the Holders of a majority of the Registrable Securities then outstanding held
by all Other Holders. No such amendment shall adversely affect the rights of
the DLJ Holders relative to the rights of the FS Holders or the Other Holders
without the written consent of the Holders of a majority of the Registrable
Securities then outstanding held by the DLJ Holders. No such amendment shall
adversely affect the rights of the Other Holders relative to the rights of the
FS Holders or the DLJ Holders without the written consent of the Holders of a
majority of the Registrable Securities then outstanding held by the Other
Holders. Each Holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any amendment authorized by this Section, whether
or not such Registrable Securities shall have been marked to indicate such
amendment.
26
3.12. Limitation on Subsequent Registration Rights.
--------------------------------------------------
After the date of this Agreement, the Company shall not, without the
prior written consent of the Holders of a majority of the Registrable Securities
then outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company that would grant such holder registration
rights senior to or otherwise more favorable than those granted to the Holders
hereunder.
3.13. "Market Stand-Off" Agreement; Agreement to Furnish Information.
--------------------------------------------------------------------
(a) Subject to the condition that all Holders holding at least 2% of
the outstanding shares of Common Stock are subject to the same restrictions,
each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, regarding any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters of Common Stock (or other securities) of the
Company not to exceed one hundred eighty (180) days following the effective date
of a registration statement of the Company filed under the Securities Act
pursuant to which an Initial Public Offering is effected. The Company may
impose stop-transfer instructions with respect to the Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period. For the avoidance of doubt such agreement
shall apply only to the Initial Public Offering.
(b) Each Holder agrees to execute and deliver such other agreements
as may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or the representative of the
underwriters of Common Stock (or other securities) of the Company, each Holder
shall provide, within ten (10) days of such request, such information concerning
such Holder as may be required by the Company or such representative in
connection with the completion of any public offering of the Company's
securities pursuant to a registration statement filed under the Securities Act.
The obligations described in this Section 3.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. Each Holder further agrees the foregoing restriction
shall be binding on any transferee from the Holder.
3.14. Rule 144 Reporting.
------------------------
With a view to making available to the Holders the benefits of
certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) File, make and keep public information available, as those terms
are understood and defined in Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company
27
for an offering of its securities pursuant to the Securities Act or pursuant to
the requirements of Section 12 of the Exchange Act;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 of the Securities Act,
and of the Exchange Act (at any when it is subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
IV GOVERNANCE
4.1. The Board Prior to an Initial Public Offering.
---------------------------------------------
The following provisions shall apply with respect to the Board prior
to an Initial Public Offering:
(a) Immediately after the Closing, the Board shall consist of eight
(8) directors, unless XXXX exercises its right pursuant to Section 4.1(f)
hereof, in which case the Board shall then consist of nine (9) directors.
(b) Each of the Securityholders and the Company agrees to take all
action necessary to cause each of the designees described in Section 4.1(c)
below to be elected or appointed to the Board concurrently with the Closing,
including without limitation, seeking and accepting resignations of incumbent
directors.
(c) Each Securityholder agrees that at all times prior to an IPO, it
will vote, or execute a written consent in lieu thereof with respect to, all of
the shares of voting capital stock of the Company owned or held of record by it,
or cause all of the shares of voting capital stock of the Company beneficially
owned by it to be voted, or cause a written consent in lieu thereof to be
executed, to elect and, during such period, to continue in office a Board
consisting solely of the following (subject to the other provisions of this
Section 4.1):
(i) three (3) designees of XXXX, subject to Section 4.1(e) below
(including any director designee of XXXX pursuant to Section 4.1(f) below,
the "XXXX Directors");
--------------
(ii) one designee of the FS Entities, collectively (the "FS
--
Director");
--------
(iii) Xxxxx for so long as he is employed by the Company or, if
Xxxxx is no longer employed by the Company, the Chief Executive Officer of
the Company at such time;
28
(iv) White for so long as he is employed by the Company or, if
White is no longer employed by the Company, the Chairman of the Americas of
the Company at such time; provided, however that in the event that any
-------- -------
Person other than White shall hold such title, XXXX shall have the option
to reduce the size of the Board by one director and eliminate this clause
(iv); and
(v) immediately after the Closing and for so long as a majority
of the members of the Board shall agree, an employee (the "Production
----------
Director") of the Company or CBRE involved in CBRE's "Transaction
--------
Management" business (as described in the Company 10-K (as defined in the
Merger Agreement)); provided, however that, during any period in which the
-------- -------
Production Director is a member of the Board, the number of XXXX Directors
set forth in Section 4.1(c)(i) shall be increased to four (4) during such
period (which number does not include the director designee of XXXX
pursuant to Section 4.1(f) below).
provided that each of the foregoing designation rights will be subject to the
--------
following provisions of this Section 4.1.
(d) The director designation right of XXXX in Section 4.1(c) will
reduce (i) to three (or two if there shall not be a Production Director as a
member of the Board at such time) if XXXX and its Affiliates, collectively,
beneficially own Common Stock representing less than 22.5% of the outstanding
Common Stock, (ii) to two (or one if there shall not be a Production Director as
a member of the Board at such time) if XXXX and its Affiliates, collectively,
beneficially own Common Stock representing less than 15% of the outstanding
Common Stock, and (iii) to zero if XXXX and its Affiliates, collectively,
beneficially own Common Stock representing less than 7.5% of the outstanding
Common Stock.
(e) The director designation right of the FS Entities in Section
4.1(c)(ii) will reduce to zero if the FS Entities and their Affiliates,
collectively, beneficially own Common Stock representing less than 7.5% of the
outstanding Common Stock.
(f) At the request of XXXX (provided that XXXX is then entitled to
designate three XXXX Directors pursuant to this Section 4.1), the number of XXXX
Directors will be increased such that XXXX thereafter has the right to designate
a majority of the entire Board (e.g., four out of seven directors), and the size
of the Board will be expanded to the extent necessary to create director
vacancies in connection therewith (subject to subsequent reduction in the number
of XXXX Directors pursuant to Section 4.1(d) hereof). In the event that the
size of the Board will exceed the board size specified by the Company's
Certificate of Incorporation or Bylaws, the Company and the Securityholders will
take all necessary steps to expand the size of the Board.
(g) Each committee of the Board will include at least one XXXX
Director and the FS Director (provided that at least one such director position
is then filled and unless the Securityholder appointing such director(s) shall
otherwise agree).
(h) If either XXXX or the FS Entities notifies the other
Securityholders in writing of its desire to remove, with or without cause, any
director of the Company previously
29
designated by it, each Securityholder will vote (to the extent eligible to vote)
all of the shares of voting capital stock of the Company beneficially owned or
held of record by it, him or her so as to remove such director or, upon request,
each Securityholder will promptly execute and return to the Company any written
resolution or consent to such effect. In the event that any of such Persons is
no longer entitled pursuant to this Section 4.1 to designate a director
previously designated by such Securityholder(s), such director promptly will be
removed from the Board, and each Securityholder will vote (to the extent
eligible to vote) all of the shares of voting capital stock of the Company
beneficially owned or held of record by it so as to remove such director or,
upon request, each Securityholder will promptly execute and return to the
Company any written resolution or consent to such effect.
(i) If any director previously designated by XXXX or the FS Entities
ceases to serve on the Board (whether by reason of death, resignation, removal
or otherwise), the Person who designated such director will be entitled to
designate a successor director to fill the vacancy created thereby, and each
Securityholder will vote (to the extent eligible to vote) all of the shares of
voting capital stock of the Company beneficially owned or held of record by it
or him or her in favor of such designation or, upon request, each Securityholder
will promptly execute and return to the Company any written resolution or
consent to such effect.
4.2. The Board Subsequent to an Initial Public Offering.
-------------------------------------------------------
Following the IPO, (a) XXXX shall be entitled to nominate a percentage
of the total number of directors on the Board that is equivalent to the
percentage of the outstanding Common Stock beneficially owned by XXXX and its
Affiliates, collectively (such percentage of directors nominated by XXXX and its
Affiliates to be rounded up to the nearest whole number of directors) and (b)
the FS Entities shall be entitled to nominate one director as long as the FS
Entities own in the aggregate at least 7.5% of the outstanding Common Stock.
The Company hereby agrees that, at all times after the IPO, at and in connection
with each annual or special meeting of stockholders of the Company at which
directors of the Company are to be elected, the Company, the Board and the
nominating committee thereof will (A) nominate and recommend to stockholders for
election or re-election as part of the management slate of directors each such
individual and (B) provide the same type of support for the election of each
such individual as a director of the Company as provided by the Company, its
directors, its management and its Affiliates to other Persons standing for
election as directors of the Company as part of the management slate. Each
Securityholder hereby agrees that, at all times after the IPO, such
Securityholder will, and will cause each of its Affiliates to, vote all shares
of Common Stock owned or held of record by it, at each annual or special meeting
of stockholders of the Company at which directors of the Company are to be
elected, in favor of the election or re-election as a member of the Board of
each such individual nominated by any Securityholder pursuant to this Section
4.2.
4.3. Board Observers.
--------------------
(a) Prior to the IPO, the FS Entities, collectively, shall be
entitled to have two observers in addition to the FS Director (the "FS
--
Observers") at all regular and special meetings of the Board for so long as the
---------
FS Entities, collectively, beneficially own Common Stock representing at least
7.5% of the outstanding Common Stock.
30
(b) Prior to the IPO and solely for so long as needed by DLJ, upon the
advice of counsel, to maintain its qualification as a "Venture Capital Operating
Company" pursuant to Section 29 C.F.R. (S) 2510.3, the DLJ Parties, by vote of a
majority of the outstanding Restricted Securities held by the DLJ Parties, shall
be entitled to have one observer (the "DLJ Observer", and together with the FS
------------
Observers, the "Observers") at all regular and special meetings of the Board for
---------
so long as the DLJ Parties, collectively, beneficially own Restricted Securities
representing at least 1.0% of the outstanding Common Stock.
(c) Each Observer shall be entitled to receive the same notice of any
such meeting as any director, and shall have the right to participate therein,
but shall not have the right to vote on any matter or to be counted for purposes
of determining whether a quorum is present thereat. In addition, each Observer
shall have the right to receive copies of any action proposed to be taken by
written consent of the Board without a meeting. Notwithstanding the foregoing,
no action of the Board duly taken in accordance with the laws of the State of
Delaware, the Certificate of Incorporation and the By-Laws shall be affected by
any failure to have provided notice to any Observer of any meeting of the Board
or the taking of action by the Board without a meeting. Any Observer may be
required by the Board to temporarily leave a meeting of the Board if the
presence of such Observer at the meeting at such time would prevent the Company
from asserting the attorney-client or other privilege with respect to matters
discussed before the Board at such time. The FS Entities agree to cause the FS
Observers to keep any matters observed or materials received by them at any
meeting of the Board strictly confidential. The DLJ Parties agree to cause the
DLJ Observer to keep any matters observed or materials received by him or her at
any meeting of the Board strictly confidential.
4.4. Advisors.
-------------
For so long as each Other Non-Management Investor shall be a
Securityholder, such Other Non-Management Investor shall have the right to
provide, and at the reasonable request of the Board or the management of the
Company, shall provide, advice with respect to the Company's industry, business
and operations ("Advisory Services"), which advice the Board or the management
-----------------
of the Company, as applicable, will consider in good faith. With respect to the
provision of such Advisory Services at the request of the Board or the
management of the Company, the Company shall reimburse each Other Non-Management
Investor for any reasonable out-of-pocket expenses incurred by such Other Non-
Management Investor in connection therewith.
4.5. Voting.
-----------
(a) Except as otherwise provided in this Section 4.5 or this Article
IV, prior to an Initial Public Offering, each of the Non-XXXX Parties agrees to
vote at any stockholders meeting (or in any written consent in lieu thereof) all
of the shares of voting capital stock of the Company owned or held of record by
it, or cause all of the shares of voting capital stock of the Company
beneficially owned by it to be voted at any stockholders meeting (or in any
written consent in lieu thereof), in same the manner as XXXX votes the shares of
voting capital stock of the Company beneficially owned by it at such meeting (or
in such written consent in lieu thereof), except with respect to the following
actions by the Company or any of its Subsidiaries:
31
(i) any transaction between (x) XXXX or any of its Affiliates
and (y) the Company or any of its Subsidiaries, other than a transaction
(A) with another portfolio company of XXXX or any of its Affiliates that
has been negotiated on arms-length terms in the ordinary course of business
between the managements of the Company or any of its Subsidiaries and such
other portfolio company, (B) with respect to which the Securityholders may
exercise their rights under Section 2.6 of this Agreement or (C)
specifically contemplated by the Merger Agreement; or
(ii) any amendment to the Certificate of Incorporation or Bylaws
of the Company that adversely affects such Securityholder relative to XXXX,
other than (x) an increase in the authorized capital stock of the Company,
or (y) amendments made in connection with any reorganization of the Company
effected to facilitate an Initial Public Offering (provided that in such
reorganization each share of each class or series of capital stock held by
the Non-XXXX Parties is treated the same as each share of the same class or
series of capital stock held by XXXX) or the acquisition of the Company by
merger or consolidation.
(b) In order to effectuate Section 4.5(a), each Non-XXXX Party hereby
grants to XXXX an irrevocable proxy, coupled with an interest, to vote, during
the period specified in Section 4.5(a) above, all of the shares of voting
capital stock of the Company owned by the grantor of the proxy in the manner set
forth in Section 4.5(a).
4.6. General Consent Rights.
---------------------------
Notwithstanding anything to the contrary stated herein, prior to an
Initial Public Offering, neither the Company nor any of its Subsidiaries shall
take any of the following actions without the prior affirmative vote or written
consent of (a) a majority of the directors of the Company, and (b) a majority of
the directors of the Company that are not XXXX Directors:
(i) any transaction between (x) XXXX or any of its Affiliates
and (y) the Company or any of its Subsidiaries, other than a transaction
(A) with another portfolio company of XXXX of any of its Affiliates that
has been negotiated on arms-length terms in the ordinary course of business
between the managements of the Company or any of its Subsidiaries and such
other portfolio company, (B) with respect to which the Securityholders may
exercise their rights under Section 2.6 of this Agreement or (C)
specifically contemplated by the Merger Agreement;
(ii) any amendment to the Certificate of Incorporation or Bylaws
of the Company that adversely affects any Securityholder relative to XXXX,
other than (x) an increase in the authorized capital stock of the Company,
or (y) amendments made in connection with any reorganization of the Company
effected to facilitate an Initial Public Offering (provided that in such
reorganization each share of each class or series of capital stock held by
the Non-XXXX Parties is treated the same as each share of the same class or
series of capital stock held by XXXX) or the acquisition of the Company by
merger or consolidation; or
32
(iii) repurchase or redeem, or declare or pay a dividend with
respect to or make a distribution upon, any shares of capital stock of the
Company beneficially owned by XXXX or any of its Affiliates, unless (x)
such repurchase, redemption dividend or distribution is made pro rata among
all holders of such class of capital stock (or, in the case of a repurchase
or redemption, all of the Non-XXXX Parties are given a proportionate right
to participate in such repurchase or redemption (to the extent they own
shares of such class of capital stock)) or (y) if such capital stock is not
Common Stock, such repurchase, redemption or dividend is required by the
terms of such capital stock.
4.7. Consent Rights of FS Director.
----------------------------------
Notwithstanding anything to the contrary stated herein, prior to an
Initial Public Offering, for so long as the FS Entities shall be entitled to
appoint the FS Director pursuant to Section 4.1 hereto, neither the Company nor
any of its Subsidiaries shall take any of the following actions without the
prior affirmative vote or written consent of (x) a majority of the directors of
the Company, and (y) the FS Director:
(a) the acquisition by purchase or otherwise, in any single or series
of related transactions, of any business or assets for a Purchase Price in
excess of $75 million; provided, however that this Section 4.7(a) shall not
-------- -------
apply to (i) the acquisition of any business or asset by an investment fund
that is controlled by the Company or any of its Subsidiaries in connection
with the ordinary course conduct of the investment advisory and management
business of the Company or any of its Subsidiaries, or (ii) acquisitions in
connection with the origination of mortgages by the Company or any of its
Subsidiaries;
(b) the sale or other disposition, in any single or series of related
transactions, of assets of the Company or its Subsidiaries for aggregate
consideration having a Fair Market Value in excess of $75 million;
provided, however that this Section 4.7(b) shall not apply to (i) the sale
-------- -------
of other disposition of any business or asset by an investment fund that is
controlled by the Company or any of its Subsidiaries in connection with the
ordinary course conduct of the investment advisory and management business
of the Company or any of its Subsidiaries, or (ii) sales or dispositions in
connection with the origination of mortgages by the Company or any of its
Subsidiaries;
(c) incur Indebtedness, unless such Indebtedness would (i) be
permitted pursuant to the terms of the documents governing the senior and
senior subordinated Indebtedness entered into by the Company in connection
with the closing of the Merger under the terms of the documents governing
the original Indebtedness as in effect on the Closing Date of the Merger
(including any refinancing or replacement of such Indebtedness in an equal
or lesser aggregate principal amount) or (ii) immediately following such
incurrence the ratio of (x) the consolidated Indebtedness of the Company
and its subsidiaries determined in accordance with United States generally
accepted accounting principles applied in a manner consistent with the
Company's consolidated financial statements to (y) the Twelve-Month
Normalized EBITDA, does not exceed 4.5:1; or
33
(d) issue capital stock of the Company (or options, warrants or other
securities to acquire capital stock of the Company) to employees, directors
or consultants of the Company or any of its Subsidiaries if such issuances,
in the aggregate, exceed 5% of the total amount of outstanding capital
stock of the Company immediately after the Closing on a fully diluted basis
(i.e., assuming the exercise, exchange or conversion of all Equity
Securities that are exercisable, exchangeable or convertible into Common
Stock), other than (i) issuances to employees, directors or consultants of
the Company and its Subsidiaries of up to 25% of the capital stock of the
Company on a fully-diluted basis within six (6) months of the closing of
the Merger and (ii) issuances in amounts equal to the capital stock of the
Company repurchased by the Company from, or the options, warrants or other
securities to acquire capital stock cancelled by the Company or its
Subsidiaries or terminated or expired without prior exercise with respect
to, Persons who, at the time of such repurchase, cancellation, termination
or expiration, were current or former employees, directors or consultants
of the Company or its Subsidiaries.
V OTHER AGREEMENTS
5.1. Financial Information.
--------------------------
(a) Within 90 days after the end of each fiscal year of the Company,
the Company will furnish each Securityholder who is a Material Securityholder a
consolidated balance sheet of the Company, as at the end of such fiscal year,
and a consolidated statement of income and a consolidated statement of cash
flows of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Board.
(b) The Company will furnish each Securityholder who is a Material
Securityholder within 45 days after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, a consolidated
balance sheet of the Company as of the end of each such quarterly period, and a
consolidated statement of income and a consolidated statement of cash flows of
the Company for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made.
(c) The Company will furnish each Securityholder who is a Material
Securityholder any monthly financial statements of the Company that are provided
to the Board no later than five (5) days after the day upon which first
furnished to the Board.
5.2. Inspection Rights.
----------------------
Each Securityholder who is a Material Securityholder shall have the
right to visit and inspect any of the books, records and properties of the
Company or any of its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company or any of its Subsidiaries with
34
its officers and independent aviators, and to review such information as is
reasonably requested, all at such reasonable times and as often as may be
reasonably requested.
5.3. Confidentiality of Records.
-------------------------------
Each Securityholder agrees to use, and to use all reasonable efforts
to insure that its authorized representatives use, the same degree of care as
such Securityholder uses to protect its own confidential information to keep
confidential any information furnished to it which the Company identifies as
being confidential or proprietary (so long as such information is not in the
public domain); provided, however, that any Securityholder may disclose such
-------- -------
proprietary or confidential information without the prior written consent of the
other parties hereto (i) to any "Related Party" (as defined below) for the
purpose of evaluating an investment in the Company so long as such Related Party
is advised of the confidentiality provisions of this Section 5.3 and agrees to
comply with such provisions, (ii) if such information is publicly available or
(iii) if disclosure is requested or compelled by legal proceedings, subpoena,
civil investigative demands or similar proceedings or (iv) if such information
was obtained by such Securityholder either independently without breaching this
Section 5.3, or from a party not known to such Securityholder to be subject to a
confidentiality agreement. Any Securityholder who provides proprietary or
confidential information to a Related Party shall be liable for any breach by
such Related Party of the confidentiality provisions of this Section 5.3. For
purposes of this Section 5.3, "Related Party" shall mean, with respect to any
-------------
Securityholder, (i) any partner, member, director, officer or employee of such
Securityholder or (ii) any Affiliate of such Securityholder.
5.4. Indemnification.
--------------------
(a) The Company shall indemnify and hold harmless (x) each
Securityholder and each of their respective Affiliates and any controlling
Person of any of the foregoing, (y) each of the foregoing's respective
directors, officers, employees and agents and (z) each of the heirs, executors,
successors and assigns of any of the foregoing from and against any and all
damages, claims, losses, expenses, costs, obligations and liabilities including,
without limiting the generality of the foregoing, liabilities for all reasonable
attorneys' fees and expenses (including attorney and expert fees and expenses
incurred to enforce the terms of this Agreement) (collectively, "Losses and
----------
Expenses"), but excluding in each case any special or consequential damages
--------
except to the extent part of any governmental or other third party claims
against the indemnified party, suffered or incurred by any such indemnified
Person or entity to the extent arising from, relating to or otherwise in respect
of, any governmental or other third party claim against such indemnified Person
that arises from, relates to or is otherwise in respect of (i) the business,
operations, liabilities or obligations of the Company or its Subsidiaries or
(ii) the ownership by such Securityholder or any of their respective Affiliates
of any equity securities of the Company (except to the extent such Losses and
Expenses (x) arise from any claim that such indemnified Person's investment
decision relating to the purchase or sale of such securities violated a duty or
other obligation of the indemnified Person to the claimant or (y) are finally
determined in a judicial action by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Securityholder
or its Affiliates) including, without limitation, any Losses and Expenses
arising from or under any federal, state or other securities law. The
indemnification provided by the Company pursuant to this Section 5.4 is separate
from and in addition to any other indemnification by the Company to which the
35
indemnified Person may be entitled, including, without limitation, pursuant to
the Certificate of Incorporation, the Bylaws, any indemnification agreements
with the Company and Section 3.9 hereto.
(b) With respect to third-party claims, all claims for indemnification
by an indemnified Person (an "Indemnified Party") hereunder shall be asserted
-----------------
and resolved as set forth in this Section 5.4. In the event that any written
claim or demand for which the Company would be liable to any Indemnified Party
hereunder is asserted against or sought to be collected from any Indemnified
Party by a third party, such Indemnified Party shall promptly notify the Company
in writing of such claim or demand (the "Claim Notice"), provided that the
------------
failure to promptly provide a Claim Notice will not affect an Indemnified
Party's right to indemnification except to the extent such failure materially
prejudices the Company. The Company shall have twenty (20) days from the date
of receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
-------------
Party (i) whether or not the Company disputes the liability of the Company to
the Indemnified Party hereunder with respect to such claim or demand and (ii)
whether or not it desires to defend the Indemnified Party against such claim or
demand. All costs and expenses incurred by the Company in defending such claim
or demand shall be a liability of, and shall be paid by, the Company. Except as
hereinafter provided, in the event that the Company notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, the Company shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense; provided, however, that (1) if the Indemnified
Party reasonably determines that there may be a conflict between the positions
of the Company and of the Indemnified Party in conducting the defense of such
claim or that there may be legal defenses available to such Indemnified Party
different from or in addition to those available to the Company, then counsel
for the Indemnified Party shall be entitled to conduct the defense at the
expense of the Company to the extent reasonably determined by such counsel to be
necessary to protect the interests of the Indemnified Party and (2) in any
event, the Indemnified Party shall be entitled at its cost and expense to have
counsel chosen by such Indemnified Party participate in, but not conduct, the
defense. The Indemnified Party shall not settle a claim or demand without the
consent of the Company. The Company shall not, without the prior written
consent of the Indemnified Party, settle, compromise or offer to settle or
compromise any such claim or demand on a basis which would result in the
imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the Indemnified Party or any Subsidiary or
Affiliate thereof or if such settlement or compromise does not include an
unconditional release of the Indemnified Party for any liability arising out of
such claim or demand. If the Company elects not to defend the Indemnified Party
against such claim or demand, whether by not giving the Indemnified Party timely
notice as provided above or otherwise, then the amount of any such claim or
demand or, if the same be contested by the Indemnified Party, that portion
thereof as to which such defense is unsuccessful (and the reasonable costs and
expenses pertaining to such defense) shall be the liability of the Company
hereunder. The Indemnified Party and Company shall each render to each other
such assistance as may reasonably be requested in order to insure the proper and
adequate defense of any such claim or proceeding.
(c) If the indemnification provided for in this Section 5.4 is
unavailable or insufficient to hold harmless an Indemnified Party under this
Section 5.4, then the Company, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by
36
such Indemnified Party as a result of the Losses and Expenses referred to in
this Section 5.4: (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Indemnified Party from the
matter giving rise to indemnification hereunder or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Indemnified Party in connection with the matter that resulted in such Losses and
Expenses, as well as any other relevant equitable considerations. Relative fault
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the matter giving rise to such Losses and Expenses.
(d) The parties agree that it would not be just and equitable if
contributions pursuant to Section 5.4(c) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of Section
5.4(c). The amount paid by any indemnified party as a result of the losses,
claims, damages or liabilities, or actions in respect thereof, referred to in
the first sentence of Section 5.4(c) shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigation, preparing to defend or defending against any claim which is the
subject of Section 5.4.
(e) As long as it is reasonably attainable at a reasonable price, the
Company will maintain directors' and officers' insurance in an amount to be
determined in good faith by the Company's board of directors to be consistent
with insurance provided to officers and directors of comparable companies.
VI MISCELLANEOUS
6.1. Additional Securities Subject to Agreement.
-----------------------------------------------
(a) Subject to the following sentence, each Securityholder agrees that
any other equity securities of the Company which they hereafter acquire by means
of a stock split, stock dividend, distribution, exercise or conversion of
securities or otherwise will be subject to the provisions of this Agreement to
the same extent as if held on the date hereof. Notwithstanding anything to the
contrary stated herein, this Agreement shall not apply to any shares of Common
Stock or any options to acquire Common Stock granted to, or purchased by, Xxxxx
or White, which are subject to the terms of the Management Securityholders'
Agreement (the "Management Securities"), and any references to Common Stock or
---------------------
Equity Securities held or beneficially owned by Xxxxx or White shall not include
any Management Securities.
6.2. Term.
---------
This Agreement will be effective from and after the date hereof and
will terminate with respect to the provisions referred to below as follows: (i)
with respect to Sections 4.1, 4.3, 4.4, 4.5, 4.6, 4.7, 5.1 and 5.2, upon
completion of an IPO; (ii) with respect to Sections 2.1(b), 2.2, 2.3, 2.4, 2.5
and 2.6, upon the expiration of the Restricted Period; (iii) with respect to
Article III (other than Sections 3.9 and 3.14) at such time as set forth in
Section 3.7; (iv) with
37
respect to Sections 3.9 and 5.4, upon the expiration of the applicable statutes
of limitations; and (iv) with respect to all Sections (other than Sections 3.9,
3.14 and 5.4), upon (A) the sale of all or substantially all of the equity
interests in the Company to a Third Party whether by merger, consolidation or
securities or otherwise, or (B) approval in writing by XXXX, the FS Parties and
the holders of a majority of the shares of Common Stock owned by the following
Persons voting as a group: the Management Parties, the DLJ Parties and the Other
Non-Management Parties.
6.3. Notices.
------------
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, by courier
service, by cable, by telecopy, by telegram, by telex or registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the addresses set forth below (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 6.3):
(a) If to the Company:
CB Xxxxxxx Xxxxx Services, Inc.
000 Xxxxx Xxxxxxxxx Xxxx.
Xx Xxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxxx, General Counsel
Fax: (000) 000-0000
with a copy to (which copy shall not be deemed notice pursuant to
this Section 6.3):
[counsel to the Company]
with an additional copy to (which copy shall not be deemed notice
pursuant to this Section 6.3):
Xxxxxxx Xxxxxxx & Xxxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxx
Fax: (000) 000-0000
(b) If to XXXX or any of its Affiliates:
c/o BLUM Capital Partners, L.P.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, General Counsel
Fax: (000) 000-0000
38
with a copy to (which copy shall not be deemed notice pursuant to
this Section 6.3):
Xxxxxxx Xxxxxxx & Xxxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxx
Fax: (000) 000-0000
(c) If to any of the FS Parties or any of their Affiliates:
c/o Xxxxxxx Xxxxxx & Co., Inc.
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: J. Xxxxxxxxx Xxxxxxx
Fax: (000) 000-0000
with a copy to (which copy shall not be deemed notice pursuant to
this Section 6.3):
Xxxxxxx & XxXxxxxx
California Plaza
29th Floor, 000 Xxxxx Xxxxx Xxx.
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
Fax: (000) 000-0000
(d) If to any of the Management Parties or Xxxx, to the address set
forth below their name on the signature pages to this Agreement, with a copy to
(which copy shall not be deemed notice pursuant to this Section 6.3):
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, 00/xx/ Xxxxx
Xxxxxxx Xxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxx
Fax: (000) 000-0000
(e) If to Xxxxx:
c/x Xxxxxx Capital Partners
0000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
39
with a copy to (which copy shall not be deemed notice pursuant to
this Section 6.3):
Xxxxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxxx Xxxxxx
Fax: (000) 000-0000
(f) (f) If to any of the DLJ Parties, to the address set forth below
their name on the signature pages to this Agreement, with a copy to (which copy
shall not be deemed notice pursuant to this Section 6.3):
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxx
Fax: (000) 000-0000
6.4. Further Assurances.
-----------------------
The parties hereto will sign such further documents, cause such
meetings to be held, resolutions passed, exercise their votes and do and perform
and cause to be done such further acts and things as may be necessary in order
to give full effect to this Agreement and every provision hereof.
6.5. Non-Assignability.
----------------------
This Agreement will inure to the benefit of and be binding on the
parties hereto and their respective successors and permitted assigns. This
Agreement may not be assigned by any party hereto without the express prior
written consent of the other parties, and any attempted assignment, without such
consents, will be null and void; provided, however, that with respect to any
-------- -------
Person who acquires any Restricted Securities from any Securityholder in
compliance with the terms hereunder: (a) such Securityholder making such
Transfer shall, prior to such Transfer, furnish to the Company written notice of
the name and address of such transferee, and (b)(i) in the case of any Transfer
from XXXX, (A) if such Person acquires a majority of the Common Stock
beneficially owned by XXXX, XXXX shall have the right to assign to such Person
all of the rights and obligations of XXXX hereunder, (B) if such Person acquires
less than a majority of the Common Stock beneficially owned by XXXX, such Person
shall assume and be entitled to all of the rights and obligations of a XXXX
Holder under Article III hereof, and (C) in any case, such Person shall execute
and deliver to the Company an Assumption Agreement and assume and be entitled to
all of the rights and obligations of a Holder hereunder, (ii) in the case of an
assignment by XXXX of its rights pursuant to Section 2.2 hereto, such assignee
or assignees shall assume and be entitled to all of the rights and obligations
of a XXXX Holder under Article III hereof and shall executive and deliver to the
Company an Assumption Agreement and assume and be entitled to all of the rights
and obligations of a Holder hereunder, (iii) in the case of any
40
Transfer from any of the FS Parties, (A) such Person shall assume all of the
rights and obligations of an FS Party hereunder and shall execute and deliver to
the Company an Assumption Agreement, and (B) in addition, if such Person
acquires a majority of the Common Stock beneficially owned by the FS Entities at
the time of such transfer and following such acquisition such Person
beneficially owns at least 10% of the outstanding Common Stock, the FS Entities
shall have the right to assign to such Person all of the rights and obligations
of the FS Entities under Section IV of this Agreement, (iv) in the case of any
Transfer from a DLJ Party, such Person shall assume and be entitled to all of
the rights and obligations of a DLJ Party hereunder and execute and deliver to
the Company an Assumption Agreement, (v) in the case of any Transfer from an
Other Non-Management Party, such Person shall assume and be entitled to all of
the rights and obligations of an Other Non-Management Party hereunder and
execute and deliver to the Company an Assumption Agreement, and (vi) in the case
of any Transfer from a Management Party, such Person shall assume and be
entitled to all of the rights and obligations of a Management Party hereunder
and execute and deliver to the Company an Assumption Agreement.
6.6. Amendment; Waiver.
----------------------
This Agreement may be amended, supplemented or otherwise modified only
by a written instrument executed by (a) the Company, (b) XXXX, so long as XXXX
and its Affiliates own in the aggregate more Common Stock than the aggregate
amount of Common Stock owned by any other Person and its Affiliates, and (c) the
holders of a majority of the Restricted Securities held by the Securityholders;
provided, however that no such amendment, supplement or modification shall
-------- -------
adversely affect (i) the FS Parties relative to XXXX without the prior written
consent of the holders of a majority of the Restricted Securities held by the FS
Parties at such time, (ii) the DLJ Parties relative to XXXX without the prior
written consent of the holders of a majority of the shares of the Restricted
Securities held by the DLJ Parties at such time, (iii) the Other Non-Management
Parties relative to XXXX without the prior written consent of the holders of a
majority of the shares of Common Stock held by the Other Non-Management Parties
at such time, and (iv) the Management Parties relative to XXXX without the prior
written consent of the holders of a majority of the shares of Common Stock held
by the Management Parties at such time. No waiver by any party of any of the
provisions hereof will be effective unless explicitly set forth in writing and
executed by the party so waiving. Except as provided in the preceding sentence,
no action taken pursuant to this Agreement, including without limitation, any
investigation by or on behalf of any party, will be deemed to constitute a
waiver by the party taking such action of compliance with any covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement will not operate or be construed as a waiver of any
subsequent breach.
6.7. Third Parties.
------------------
This Agreement does not create any rights, claims or benefits inuring
to any Person that is not a party hereto nor create or establish any third party
beneficiary hereto.
41
6.8. Governing Law.
-------------------
This Agreement will be governed by, and construed in accordance with,
the laws of the State of Delaware, applicable to contracts executed and to be
performed entirely within that state.
6.9. Specific Performance.
--------------------------
Without limiting or waiving in any respect any rights or remedies of
the parties hereto under this Agreement now or hereinafter existing at law or in
equity or by statute, each of the parties hereto will be entitled to seek
specific performance of the obligations to be performed by the other in
accordance with the provisions of this Agreement.
6.10. Entire Agreement.
----------------------
This Agreement sets forth the entire understanding of the parties
hereto with respect to the subject matter hereof.
6.11. Titles and Headings.
-------------------------
The section headings contained in this Agreement are for reference
purposes only and will not affect the meaning or interpretation of this
Agreement.
6.12. Severability.
------------------
If any provision of this Agreement is declared by any court of
competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this Agreement will not be affected and will remain in full force
and effect.
6.13. Counterparts.
------------------
This Agreement may be executed in any number of counterparts, each of
which will be deemed to be an original and all of which together will be deemed
to be one and the same instrument.
6.14. Ownership of Shares.
-------------------------
Whenever a provision of this Agreement refers to shares of Common
Stock owned by a Securityholder or owned by a Securityholder and its Affiliates,
such provision shall be deemed to refer to those shares owned of record by such
Securityholder or such Securityholder and its Affiliates, as applicable, and
shall not be deemed to include other Restricted Securities that such
Securityholder (or such Securityholder and its Affiliates, if applicable) may be
deemed to beneficially own due to the provisions of this Agreement and/or any
other agreements, arrangements or understandings among the parties hereto
relating to the voting or Transfer of Restricted Securities.
42
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
XXXX XX HOLDING CORP.
By: ____________________________________
Name:
Title:
CB XXXXXXX XXXXX SERVICES, INC.
By: _____________________________________
Name:
Title:
RCBA STRATEGIC PARTNERS, L.P.
By: RCBA GP, L.L.C., its general partner
By: _____________________________________
Name:
Title:
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners, L.P., its general
Partner
By: FS Holdings, Inc., its general partner
By: _____________________________________
Name:
Title:
43
FS EQUITY PARTNERS INTERNATIONAL, L.P.
By: FS&Co. International, L.P., its general
Partner
By: FS International Holdings Limited,
its general partner
By: _____________________________________
Name:
Title:
DLJ INVESTMENT FUNDING, INC.
By: _____________________________________
Name:
Title:
THE XXXX HOLDING COMPANY
______________________________
By: Xxxxxx X. Xxxx
______________________________
Xxxxxxxx X. Xxxxx
MANAGEMENT INVESTORS:
______________________________
Xxxxxxx X. Xxxxx
______________________________
W. Xxxxx Xxxxx
44
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Securityholders'
Agreement among CB Xxxxxxx Xxxxx Services, Inc., RCBA Strategic Partners, L.P.,
FS Equity Partners III, L.P., FS Equity Partners International, L.P., DLJ
Investment Funding, Inc., The Xxxx Holding Company, Xxxxxxxx X. Xxxxx and the
Management Investors named therein, I, _______________________, the spouse of
Xxxxxx X. Xxxx, do hereby join with my spouse in executing the foregoing
Securityholders' Agreement and do hereby agree to be bound by all of the terms
and provisions thereof.
Dated as of ______________ ____, 2001 ___________________________________
[Spouse]
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Securityholders'
Agreement among CB Xxxxxxx Xxxxx Services, Inc., RCBA Strategic Partners, L.P.,
FS Equity Partners III, L.P., FS Equity Partners International, L.P., DLJ
Investment Funding, Inc., The Xxxx Holding Company, Xxxxxxxx X. Xxxxx and the
Management Investors named therein, I, _______________________, the spouse of
Xxxxxxxx X. Xxxxx, do hereby join with my spouse in executing the foregoing
Securityholders' Agreement and do hereby agree to be bound by all of the terms
and provisions thereof.
Dated as of ______________ ____, 2001 ___________________________________
[Spouse]
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Securityholders'
Agreement among CB Xxxxxxx Xxxxx Services, Inc., RCBA Strategic Partners, L.P.,
FS Equity Partners III, L.P., FS Equity Partners International, L.P., DLJ
Investment Funding, Inc., The Xxxx Holding Company, Xxxxxxxx X. Xxxxx and the
Management Investors named therein, I, _______________________, the spouse of
Xxxxxxx X. Xxxxx, do hereby join with my spouse in executing the foregoing
Securityholders' Agreement and do hereby agree to be bound by all of the terms
and provisions thereof.
Dated as of ______________ ____, 2001 ___________________________________
[Spouse]
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Securityholders'
Agreement among CB Xxxxxxx Xxxxx Services, Inc., RCBA Strategic Partners, L.P.,
FS Equity Partners III, L.P., FS Equity Partners International, L.P., DLJ
Investment Funding, Inc., The Xxxx Holding Company, Xxxxxxxx X. Xxxxx and the
Management Investors named therein, I, _______________________, the spouse of W.
Xxxxx Xxxxx, do hereby join with my spouse in executing the foregoing
Securityholders' Agreement and do hereby agree to be bound by all of the terms
and provisions thereof.
Dated as of ______________ ____, 2001 ___________________________________
[Spouse]
Exhibit A
FORM OF ASSUMPTION AGREEMENT
[DATE]
To the Parties to the Securityholders' Agreement dated as of _______ ___, 2001
Dear Sirs or Madams:
Reference is made to the Securityholders' Agreement, dated as of _________
___, 2001 (the "Securityholders' Agreement"), among XXXX XX Holding Corp., CB
Xxxxxxx Xxxxx Services, Inc., RCBA Strategic Partners, L.P., FS Equity Partners
III, L.P., FS Equity Partners International, DLJ Investment Funding, Inc., The
Xxxx Holding Company, Xxxxxxxx X. Xxxxx, and the individuals identified on the
signature pages thereto as "Management Investors".
In consideration of the representations, covenants and agreements
contained in the Securityholders' Agreement, the undersigned hereby confirms and
agrees that it shall be bound by all or certain of the provisions thereof in the
manner set forth in Section 6.5 thereto.
This Assumption Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, applicable to contracts
executed and to be performed entirely within that state.
Very truly yours,
[Transferee]
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Assumption
Agreement with respect to the Securityholders' Agreement among CB Xxxxxxx Xxxxx
Services, Inc., RCBA Strategic Partners, L.P., FS Equity Partners III, L.P., FS
Equity Partners International, L.P., DLJ Investment Funding, Inc., The Xxxx
Holding Company, Xxxxxxxx X. Xxxxx and the Management Investors named therein,
I, _______________________, the spouse of [Transferee], do hereby join with my
spouse in executing the foregoing Assumption Agreement and do hereby agree to be
bound by all of the terms and provisions thereof.
Dated as of ______________ ____, 20__ ___________________________________
[Spouse]
EXHIBIT A
---------
SECURITYHOLDERS' AGREEMENT
among
RCBA STRATEGIC PARTNERS, L.P.,
FS EQUITY PARTNERS III, L.P.,
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
THE XXXX HOLDING COMPANY,
XXXXXXXX X. XXXXX,
DLJ INVESTMENT FUNDING, INC.,
THE MANAGEMENT INVESTORS
and
XXXX XX HOLDING CORP.
Dated as of _______________ ____, 2001
TABLE OF CONTENTS
Page
----
I INTRODUCTORY MATTERS................................................. 1
1.1. Defined Terms.................................................. 1
1.2. Construction................................................... 9
II TRANSFERS............................................................ 9
2.1. Limitations on Transfer........................................ 9
2.2. Right of First Offer........................................... 11
2.3. Certain Permitted Transfers.................................... 12
2.4. Tag-Along Rights............................................... 13
2.5. Drag-Along Rights.............................................. 14
2.6. Participation Right............................................ 15
III REGISTRATION RIGHTS.................................................. 16
3.1. Demand Registration............................................ 16
3.2. Piggyback Registrations........................................ 18
3.3. Expenses of Registration....................................... 19
3.4. Effective Registration Statement............................... 19
3.5. Selection of Counsel........................................... 20
3.6. Obligations of the Company..................................... 20
3.7. Termination of Registration Rights............................. 23
3.8. Delay of Registration; Furnishing Information.................. 23
3.9. Indemnification................................................ 23
3.10. Assignment of Registration Rights.............................. 26
3.11. Amendment of Registration Rights............................... 26
3.12. Limitation on Subsequent Registration Rights................... 27
3.13. "Market Stand-Off" Agreement; Agreement to Furnish Information. 27
3.14. Rule 144 Reporting............................................. 27
IV GOVERNANCE........................................................... 28
4.1. The Board Prior to an Initial Public Offering.................. 28
4.2. The Board Subsequent to an Initial Public Offering............. 30
4.3. Board Observers................................................ 30
4.4. Advisors....................................................... 31
4.5. Voting......................................................... 31
4.6. General Consent Rights......................................... 32
4.7. Consent Rights of FS Parties................................... 33
V OTHER AGREEMENTS..................................................... 34
5.1. Financial Information.......................................... 34
5.2. Inspection Rights.............................................. 34
5.3. Confidentiality of Records..................................... 35
5.4. Indemnification................................................ 35
VI MISCELLANEOUS........................................................ 37
TABLE OF CONTENTS
Page
----
6.1. Additional Securities Subject to Agreement................... 37
6.2. Term......................................................... 37
6.3. Notices...................................................... 38
6.4. Further Assurances........................................... 40
6.5. Non-Assignability............................................ 40
6.6. Amendment; Waiver............................................ 41
6.7. Third Parties................................................ 41
6.8. Governing Law................................................ 42
6.9. Specific Performance......................................... 42
6.10. Entire Agreement............................................. 42
6.11. Titles and Headings.......................................... 42
6.12. Severability................................................. 42
6.13. Counterparts................................................. 42
6.14. Ownership of Shares.......................................... 42
