EXHIBIT 3
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 . . . . . . . . . . . . . . . . . . . . . . 10
II TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1. Limitations on Transfer . . . . . . . . . . . . . . . . 11
2.2. Right of First Offer . . . . . . . . . . . . . . . . . . 12
2.3. Certain Permitted Transfers . . . . . . . . . . . . . . 14
2.4. Tag-Along Rights . . . . . . . . . . . . . . . . . . . . 15
2.5. Drag-Along Rights . . . . . . . . . . . . . . . . . . . 17
2.6. Participation Right . . . . . . . . . . . . . . . . . . 18
III REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . 19
3.1. Demand Registration . . . . . . . . . . . . . . . . . . 19
3.2. Piggyback Registrations . . . . . . . . . . . . . . . . 22
3.3. Expenses of Registration . . . . . . . . . . . . . . . . 23
3.4. Effective Registration Statement . . . . . . . . . . . . 24
3.5. Selection of Counsel . . . . . . . . . . . . . . . . . . 24
3.6. Obligations of the Company . . . . . . . . . . . . . . . 24
3.7. Termination of Registration Rights . . . . . . . . . . . 28
3.8. Delay of Registration; Furnishing Information . . . . . 28
3.9. Indemnification . . . . . . . . . . . . . . . . . . . . 29
3.10. Assignment of Registration Rights . . . . . . . . . . . 32
3.11. Amendment of Registration Rights . . . . . . . . . . . . 32
3.12. Limitation on Subsequent Registration Rights . . . . . . 33
3.13. "Market Stand-Off" Agreement; Agreement to Furnish
Information . . . . . . . . . . . . . . . . . . . . . . 33
3.14. Rule 144 Reporting . . . . . . . . . . . . . . . . . . . 34
IV GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.1. The Board Prior to an Initial Public Offering . . . . . 34
4.2. The Board Subsequent to an Initial Public Offering . . . 37
4.3. Board Observers . . . . . . . . . . . . . . . . . . . . 38
4.4. Advisors . . . . . . . . . . . . . . . . . . . . . . . . 38
4.5. Voting . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.6. General Consent Rights . . . . . . . . . . . . . . . . . 40
4.7. Consent Rights of FS Director . . . . . . . . . . . . . 41
V OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 42
5.1. Financial Information . . . . . . . . . . . . . . . . . 42
5.2. Inspection Rights . . . . . . . . . . . . . . . . . . . 43
5.3. Confidentiality of Records . . . . . . . . . . . . . . . 43
5.4 Indemnification . . . . . . . . . . . . . . . . . . . . 43
VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.1. Additional Securities Subject to Agreement . . . . . . . 46
6.2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . 47
6.4. Further Assurances . . . . . . . . . . . . . . . . . . . 49
6.5. Non-Assignability . . . . . . . . . . . . . . . . . . . 49
6.6. Amendment; Waiver . . . . . . . . . . . . . . . . . . . 50
6.7. Third Parties . . . . . . . . . . . . . . . . . . . . . 51
6.8. Governing Law . . . . . . . . . . . . . . . . . . . . . 51
6.9. Specific Performance . . . . . . . . . . . . . . . . . . 51
6.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . 51
6.11. Titles and Headings . . . . . . . . . . . . . . . . . . 51
6.12. Severability . . . . . . . . . . . . . . . . . . . . . . 52
6.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . 52
6.14. Ownership of Shares . . . . . . . . . . . . . . . . . . 52
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).
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"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 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.
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"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 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.
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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.
"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
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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.
"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.
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"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).
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"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 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
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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).
"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.
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"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 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
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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 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
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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.
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
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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
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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
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,
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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 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
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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 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
16
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 respect to its Ownership of Common Stock), (ii) agree to
pay its pro rata share (based on the number of shares transferred by each
17
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
18
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 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,
19
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 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.
20
(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 181st day following the last day of the Relevant
Period; or
(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.
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(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
22
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 (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
23
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 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
24
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 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
25
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
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
26
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
27
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 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
28
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 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
29
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 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
30
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 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
31
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 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
32
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.
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
33
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 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
34
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;
(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
35
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 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
36
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.
37
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.
(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. Section 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
38
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:
(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
39
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
(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.
40
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
(d) issue capital stock of the Company (or options,
warrants or other securities to acquire capital stock of the Company) to
41
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.
42
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 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
43
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 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
44
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 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
45
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
46
as set forth in Section 3.7; (iv) with 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:
47
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
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, 00xx Xxxxx
Xxxxxxx Xxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxx
Fax: (000) 000-0000
48
(e) If to Xxxxx:
c/x Xxxxxx Capital Partners
0000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
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) 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
49
(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
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
50
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.
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.
51
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.
52
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:
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
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]
